2010 ANNUAL REPORT - ShareData · PDF file UCS 2010 ANNUAL REPORT 2010 ANNUAL REPORT. ......

UCS GROUP LIMITED

20TH FLOOR, 209 SMIT STREET

BRAAMFONTEIN, JOHANNESBURG

www.ucs.co.za

UCS 2

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2010 ANNUAL REPORT

INVESTMENTS DIVISION

RETAIL SOLUTIONS DIVISION

SOFTWARE DIVISION

UCS SOLUTIONS CEB Maintenance Africa

UCS TECHNOLOGYSERVICES

GAAP Point-of-Sale

ULTISALES Retail Software

CSC

INNERVATIONValue Added Services

UCS DYNAMICS Software Solutions

UCS MOBILITI

4LIFEProgram

ACCSYS FERNRIDGEConsulting

UKSUniversal Knowledge Software

wiWALLET Mobile Payments

V&A RISKVolume and Affi nity Risk Managemnt

ARGILITY AQUITEC CQUENTIALSolutions

ANNUAL REPORT 2010 1

UCS is a leading provider of a range of customised and packaged IT solutions to the retail sector in domestic and international markets.

It also adds value through the development and sale of payment products, corporate loyalty programmes and mobile payment solutions.

CONTENTS

2 Financial highlights

3 Five-year financial review

4 Group overview

8 Chairman’s report

10 Board of Directors

12 Chief Executive Officer’s report

16 Retail solutions division report

18 Investments division report

20 Software division report

22 Chief Financial Officer’s report

25 Corporate governance statement

28 Corporate social investment

29 Report of the Audit and Risk Committee

30 Value added statement

31 Analysis of key ratios

33 Group annual financial statements

100 Shareholding analysis

101 Notice of Annual General Meeting

2 UCS ANNUAL REPORT 2010

2010

R’000

2009

R’000 % Change

GROUP INCOME STATEMENT*

REVENUE 1 321 070 1 232 019 7,2

PROFIT FROM OPERATIONSbefore finance charges, investment revenues, amortisation, depreciation, foreign exchange

differences, impairments and research and developments expenditure 201 654 170 758 18,1

Depreciation and amortisation (71 822) (69 126) 3,9

Foreign exchange differences (8 221) (10 605) (22,5)

Impairment of intangible assets (including goodwill) – (8 027) 100,0

Profit related to Enterprise Solutions division disposed of in the prior year 12 443 – 100,0

Profit on disposal of equity interest in subsidiary company 176 – 100,0

Research and development expenditure (14 801) (7 278) 103,4

PROFIT BEFORE FINANCE CHARGES AND INVESTMENT REVENUES 119 429 75 722 57,7

Net finance charges and investment revenues (4 670) (18 045) (74,1)

PROFIT BEFORE TAXATION 114 759 57 677 99,0

Taxation (43 048) (32 216) 33,6

PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS 71 711 25 461 181,7

(LOSS) PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS (22 104) 15 110 (246,3)

PROFIT FOR THE YEAR 49 607 40 571 22,3

Attributable to:

Owners of the Company 39 642 27 446 44,4

Non-controlling interest 9 965 13 125 (24,1)

ORDINARY SHARE PERFORMANCEEarnings per share (cents) 21,7 6,2 250,0

Headline earnings per share (cents) 17,7 8,6 105,8

Weighted average number of ordinary shares in issue (’000) 284 653 290 147 (1,9)

Ordinary shares in issue (’000) 285 356 284 391 0,3

Net asset value per share (cents) 170,3 165,0 3,2

Share price (cents) 190 170 11,8

* The income statement results shown above include continuing operations only.

+7% Revenue +22% Normalised PBIT

+14% Normalised EBITDA +106% Headline earnings per share

FINANCIAL HIGHLIGHTS

FIVE-YEAR FINANCIAL REVIEW for the year ended 30 September 2010

2010

R’000

2009

R’000

2008

R’000

2007

R’000

2006

R’000

GROUP INCOME STATEMENT*Revenue 1 340 375 1 498 787 1 225 743 1 070 539 793 367

Profit before finance charges and investment revenues 97 145 106 745 138 008 185 840 100 341

Net finance charges and investment revenues (4 490) (16 893) (9 100) (1 318) (5 154)

Profit before taxation 92 655 89 852 128 908 184 522 95 187

Taxation (43 048) (49 281) (21 487) (17 916) (5 371)

Profit for the year 49 607 40 571 107 421 166 606 89 816

Attributable to:

Owners of the Company 39 642 27 446 95 809 153 254 83 458

Non-controlling interest 9 965 13 125 11 612 13 352 6 358

Ordinary shares in issue (’000) 285 356 284 391 289 676 283 841 249 108

Earnings per share (cents) 13,9 9,5 33,3 57,4 34,3

Headline earnings per share (cents) 16,2 11,4 31,9 34,7 21,6

Dividends per share (cents) 9,0 9,0 9,0 8,0 6,0

Share price (cents) 190 170 230 436 230

* The income statement results shown above include continuing as well as discontinued operations.

2010 2009 2008 2007 2006

R’000 R’000 R’000 R’000 R’000

GROUP BALANCE SHEETAssets

Non-current assets

Property, plant and equipment (including rental equipment) 86 413 89 775 64 869 72 754 52 502

Intangible assets 156 817 79 479 118 027 65 775 122 037

Goodwill 238 615 237 974 311 660 250 522 135 849

Investments and loans receivable 41 888 9 989 22 362 7 028 7 264

Finance lease receivables 6 645 3 422 4 397 – –

Deferred taxation assets 32 936 36 141 48 500 34 654 25 895

Current assets

Inventories 47 249 47 660 42 565 28 034 23 148

Trade and other receivables 179 463 181 962 223 847 197 963 148 783

Finance lease receivables 3 998 2 723 5 276 – –

Current taxation receivable 7 246 3 203 4 226 762 1 070

Cash and bank balances 131 885 177 764 142 655 144 823 96 832

Assets classified as held for sale – 109 222 11 616 – –

Total assets 933 155 979 314 1 000 000 802 315 613 380

Equity and liabilities

Equity attributable to owners of the Company 486 103 469 302 478 927 387 402 300 996

Non-controlling interest 27 709 28 337 27 662 23 367 38 448

Non-current liabilities

Borrowings 88 227 104 530 139 017 55 277 57 325

Deferred taxation liabilities 15 356 9 572 18 317 10 129 12 469

Deferred revenue 11 000 22 000 – – 7 048

Current liabilities

Trade and other payables 230 144 215 742 222 711 205 980 158 813

Borrowings 50 670 75 008 76 541 93 543 23 896

Current taxation payable 6 390 2 317 25 045 19 209 5 072

Deferred revenue 17 556 17 297 11 780 7 408 9 313

Liabilities directly associated with assets classified

as held for sale – 35 209 – – –

Total equity and liabilities 933 155 979 314 1 000 000 802 315 613 380

FINANCIAL HIGHLIGHTS 3


UCS Solutions (Proprietary) Limited (‘UCS Solutions’) is a leading business and IT solutions provider to clients in the retail and consumer goods industries. The company harnesses its industry knowledge to help clients achieve better business performance, offering end-to-end consulting, business systems outsourcing and technology services across the full range of IT operations. UCS Solutions has 414 employees.

CEB Maintenance Africa (Proprietary) Limited (‘CEB’) specialises in ‘man-in-van’ IT services for large-scale retail operators and has an enviable list of blue chip retail customers. CEB has 608 employees.

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. The business has 14 employees.

UCS Technology Services (Proprietary) Limited renders services relating to the ‘in-store’ point-of-sale providing software on behalf of third party software vendors as well as solutions and services required to install, operate and support point-of-sale information technology elements. UCS Technology Services has 413 employees.

Aquitec is a premier 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 and has 32 employees.

Argility (Proprietary) Limited (‘Argility’) is an innovative international 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. Following the acquisition of Argility Limited, UCS Software and UCS Software Manufacturing were merged under the Argility brand to create an enlarged software business with 247 employees.

Software Division

56%100%100%

AN OVERVIEW OF THE UCS GROUP

Retail Solutions Division

100% 100% 100%

51% 100% 51%

Investments Division

70%100% 100%

GROUP OVERVIEW 5

51%

76% 51%

100% 70% 80%


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.

Accsys (Proprietary) Limited (‘Accsys’) markets and supports one of South Africa’s most comprehensive suites of integrated personnel and human resource management solutions. High level training, professional consultancy and technical support back industry leading software applications, including Accsys Payroll Manager, Accsys Time Manager and Accsys HR. Accsys has 124 employees.

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. The company has 13 employees.

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. The company dominates its market sector in KwaZulu-Natal and is increasing its market share rapidly in the rest of the country. The company has 131 employees.

Ultisales Retail Software (Proprietary) Limited 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. Ultisales Retail Software has 8 employees.

The business known as CSC is an authorised VeriFone International Partner for VeriFone payment systems into sub-Saharan Africa and has sale and distribution rights for such terminals into the territory. In addition to supplying the payment devices, CSC develops and licenses its own intellectual property software, fulfils the associated field services and maintains the devices. Having supplied in excess of 180 000 devices to the financial, retail, petroleum and hospitality sectors, CSC is considered to be a market leader in this field. CSC has 159 employees.

AN OVERVIEW OF THE UCS GROUP

Retail Solutions Division

100% 100% 100%

Investments Division

70%100% 100%

51% 100% 51%

Software Division

56%100%100%

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. The company has 18 employees.

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. Innervation has 39 employees.

UCS Dynamics Software Solutions (Proprietary) Limited is a Microsoft Gold Certifi ed Partner that specialises in providing integrated business solutions using the Microsoft Dynamics™ ERP suite of applications. Services include analysis, design, customisation, implementation, training and support. This business has 28 employees.

UCSMobiliti focuses on Enterprise mobility solutions for the retail industry. UCSMobiliti concentrates on mobilising business processes in the retail in-store environment, using a web-based mobile portal developed by its strategic partner Tlantic.

GROUP OVERVIEW 7

100% 70%

76% 51%

Volume and Affinity Risk Management (Proprietary) Limited (‘V&A Risk’) is the provider of insurance products and administration and management leveraging brand affinity. This business has 3 employees.

WiWallet Mobile Payments (Proprietary) Limited offer mobile payment technology, including a mobile payment platform and mobile payment application enabling users to pay for products using their mobile devices. WiWallet has 6 employees.

51%

80%


The awarding of the FIFA World Cup to our beloved country was accompanied by prophecies of doom and gloom from many a quarter and it was heartwarming and with pride that us South Africans dispelled many of these naysayers and put on what can only be described as a superb and World Class success.

Duncan Coles CHAIRMAN

technological and operational areas and the Cordys interaction is yet

another indication of the Group’s flexibility in adapting its product to

meet market requirements.

As has been the case over many years, the Group is ever mindful of

having the appropriately skilled staff employed in their relevant areas

of competence and this past year was no exception.

Both organisational and management changes took place that we firmly

believe will result in streamlined processes. International software

agreements signed by UCS during this past year will enable our local

offerings to be considerably strengthened and be even more attractive

to our customers and should induce prospects to signing business

contracts with the Group.

UCS enters 2011 with the knowledge that we have taken the internal

actions required to take advantage of retail and other market sectors

that are showing positive signs of recovery. We are well positioned

through our broad offerings to increase our presence in markets where

we are already entrenched and take advantage of new opportunities as

they arise.

We have talented, strong management teams who with a skilled

employee base have the required depth of expertise required to

continue to produce high quality products for our markets.

We look forward to a much improved 2011.

A material event which arose during the finalisation of this report

was the receipt by the Group of a firm intention from the Business

Connexion Group Limited (‘BCG’) for the purchase of five identified

subsidiary companies (‘Disposal Entities’) from UCS. This was

announced to the market on the 15th of December on acceptance of

the firm intention by the UCS board. The transaction represents an

equity swap where, on execution, UCS will be the single largest

shareholder in BCG with 25% plus 1 share.

The sale of the Disposal Entities to BCG represents an opportunity for

UCS to execute against its stated strategy of separating its service

businesses from its software businesses, and in the process unlocking

value for the shareholders of UCS.

By placing the service businesses into BCG there will be opportunities

for such businesses to leverage the BCG group’s critical mass,

strategic African continental positioning, stronger BBBEE rating and

well positioned data centre and cloud computing platforms.

UCS shareholders have the opportunity to remain invested in these

assets through the BCG shares to be allotted and issued in settlement

of the guaranteed purchase consideration. UCS Group will be required

to change its name and will continue to operate as an investment

holding company for selected assets including Software and Value

Added Services.

THANKS

My thanks go to my colleagues on the board, both executive and non-

executive, as well as executive and senior management of all the UCS

Group companies. To all UCS employees who have worked under

difficult circumstances to ensure that the company continues to

serve its clients with the high-end quality solutions they require for

their businesses, I express my sincere thanks and appreciation.

The national pride and patriotism was only too evident to see and we

sent the many visitors to our country away with a new and enlightened

perspective of our country. UCS, too, felt the financial positives

engendered by this event, albeit in a small way compared to other

companies, but the lasting spirit and teamwork is something that we

will treasure and remember forever. This teamwork approach has

always been the backbone of our Group and remains intact and even

more embedded in our culture.

I can clearly recall making note in our last year’s report of the

challenging conditions the Group was facing going into this

financial year and this proved to be accurate in the early months of

the financial year.

Few of us, I believe, could have forecast just how strong the Rand

would perform over the past twelve months and this had consequences

for our Group both good and bad.

Similarly, the substantial decrease in the prime overdraft rate, although

anticipated to an extent, has also contributed to a decrease in the

Group’s borrowings. These two factors are likely to remain as features

in all our lives over the coming future.

As I have stated in many of our past Annual reports, UCS’s fortunes

are aligned to some degree to the prosperity of the retail sector of

the economy.

Any downturn in the South African economy tends to lead to consumers

changing their buying patterns which in turn impacts, among others,

on the fast moving consumer goods sector which relies on the

discretionary spending of consumers. This also has an impact on the

fortunes of the major retailers who either curtail or increase their IT

spend accordingly and, as UCS is a fairly dominant force in some

sectors, it does have consequences for the profitability of some Group

companies. Although throughout the early part of the 2010 financial

year we witnessed a slow uptake of new systems and applications by

our major clients and prospects, we have been encouraged by recent

signs of renewed levels of interest and enquiry by many of South

Africa’s major household name Retailers.

Despite the difficulties presented by the economy, UCS performed

credibly during the year. As in the past, management continued to

focus on generating ongoing annuity income wherever possible rather

than pursuing large once-off projects. By their very nature these once-

off projects require major commitments in terms of staff with high

levels of expertise and take many hours to complete. This, in turn,

reduces the number of skilled staff available for projects which could

be generated to create steady revenue streams for UCS.

As a consequence of this focus on annuity income, the Group was able

to increase turnover and trading margins whilst revenue growth was

mainly achieved through organic growth. Strategic acquisitions, which

have always formed a part of UCS’s strategy in a competitive marketplace,

made a minor contribution to revenues.

New software sales were lower than we had hoped for but we are

optimistic that our exposure and venture with the much acclaimed

Cordys platform will translate to an improvement in these revenues

going forward. Undoubtedly, one of the strengths of the Group over the

past 10 years has been its ability to respond swiftly and effectively to

changes within the IT services sector which tend to be in both the

CHAIRMAN’S REPORT

CHAIRMAN’S REPORT 9


From left to right

BOARD OF DIRECTORS

Duncan Coles (62) MCSSA

CHAIRMAN

Together with John Bright, Duncan is a principal

founder of UCS. He started his career in computing

in 1967 and entered the computer bureau field in

1970 at Management Computer Services (Proprietary)

Limited where he was employed as a software developer/

systems analyst and later promoted to the position of

General Manager. In 1975, following the merger of the

MCS and NCR computer bureaus he became an

assistant to John Bright where his responsibilities

were concentrated mainly on software development

and software developer’s management. Post the

establishment of UCS and the subsequent buy-out of

the computer bureau from NCR in 1978, Duncan’s

major responsibilities have been in respect of the day-

to-day management of the computer operations and

production control areas within Argility (Proprietary)

Limited where, in addition, he plays an executive role

and is responsible for the Software Services Ceres

division. Duncan has served as an executive Director

on the board since the listing of the UCS Group in 1998

and is currently the Group Chairman.

John Bright (63)

CHIEF EXECUTIVE OFFICER

Together with Duncan Coles, John is a principal

founder of UCS. His original background was as a

software developer and systems analyst. He worked

in the computer bureau division of NCR from 1968

to 1978 when he left to start Universal Computer

Services (Proprietary) Limited. John now provides

strategic direction to the Group as Chief Executive

Officer of UCS Group Limited.

Vani Chetty (40) †

A leading competition lawyer in her field who advises

local and foreign corporations on competition issues.

Vani obtained her undergraduate BA Law (1990) and

LLB (1992) degrees in South Africa and then completed

a Masters Degree in Law at Georgetown University in

Washington DC in 1996.

Joseph Claassen (51) †

MEMBER, REMUNERATION COMMITTEE

Following his Matric in 1976, Joseph obtained

qualifications in telecommunications and in

management. Joseph’s role is to provide inputs on

empowerment and employment equity issues as well

as insights into the telecommunications industry.

He has over 20 years experience in the tele-

communications and signal distributor sector. He

currently serves as Vice-Chairman of the SA Canada

Chamber of Business. He also served the Black

Management Forum in various capacities, e.g.

Chairman of the Johannesburg Chapter from 1997 to

2001, BMF Gauteng Regional Manager and alternate

non-executive director of BMF Investment Company.

Josephine Fortuin (30) CA(SA)

CHIEF FINANCIAL OFFICER

Josie graduated from UNISA with a B. Compt degree

in 2002 and completed her articles with Watermark

Auditors in the same year. She completed her CTA in

2003 and passed the FQE in 2004. Josie joined the

UCS Group in March 2004 and was appointed Group

Financial Manager in March 2005 and has since

worked alongside Dean Sparrow in this role during

which time the Group has experienced material

growth. Josie was intricately involved in the creation

and unbundling of Argility Limited and on its coming

into existence in September 2007, was appointed

CFO of this business. In April 2009, Josie was

appointed Chief Financial Officer of UCS Group

Limited, and nominated to be on the UCS Board

of Directors.

Adv Richard Goodman (53)

SC BA LLB LLM †

MEMBER, AUDIT COMMITTEE

An eminent practising advocate of the Cape Bar and

of the High Court of South Africa. A graduate of

the University of Stellenbosch (BA Law, 1978 and

LLB, 1980), Mr Goodman went on to study at the

University of Cambridge where he completed his LLM

in 1982.

BOARD OF DIRECTORS 11

Bryan Hattingh (54) †

MEMBER, REMUNERATION COMMITTEE

Bryan is the CEO of Cycan, a company which enables

individual leaders and organizations to be more

effective, agile and accomplished. He operates in a

number of capacities, from entrepreneur, executive

coach, head hunter and professional speaker to

business development executive. He provides thought

leadership and consulting services to organisations,

ranging from incubator SMMEs to large listed

corporates.

Neil Michelson (52) CA(SA)

COMMERCIAL DIRECTOR

Neil completed his Bachelor of Accountancy in 1983,

and wrote and passed the Board exam in 1984. He

ran numerous small enterprises and consulted from

1985 – 1988 when he joined Spartan Computers in

1988 as Financial Director until 1995 when he sold

the business as Managing Director. Neil joined the

UCS Group Board in 1998 as Financial Director. After

numerous acquisitions, the Group identified the need

for splitting the role of Group FD and Group COO and

Neil was appointed as Group Chief Operating Officer

in 2002. Up to September 2007 Neil also fulfilled

the role of Chief Executive Officer of UCS Software

(Proprietary) Limited.

Peter Terblanche (66) †

CHAIRMAN, REMUNERATION COMMITTEE

MEMBER, AUDIT COMMITTEE

Peter has 44 years experience in the IT software and

services industry and was one of the pioneers of the

software value added services market. He has been

a non-executive director of UCS Group Limited since

2001 and is Chairman of the Remuneration Committee

and a member of the Audit Committee.

Mntungwa Morojele (51)

MBA CA (Lesotho)

CHAIRMAN, AUDIT COMMITTEE

Mntungwa was appointed to the board as an

independent non-executive director on 31 August

2005 and he is the Chairman of the UCS Group Audit

Committee. He holds a Master of Science degree

from Georgetown University, Washington DC, USA, is

a chartered accountant and has a Master of Business

Administration from University of Cape Town’s

Graduate School of Business. He is a member of the

Institute of Directors of South Africa, and served as a

Council member of that Institute for four years (2004

– 2008). He has been a member of the board of the

Spur Corporation since May 2010, and sits on its

Audit and Remuneration Committees.

Dean Sparrow (35) CA(SA)

DEPUTY CHIEF EXECUTIVE OFFICER

Dean qualified as a Chartered Accountant and

completed his articles at Deloitte & Touche in 1999.

After a three month secondment to New York, he was

appointed as a manager in the firm’s assurance and

advisory services division where he also carried out

certain corporate finance assignments. He joined the

UCS Group as Group Financial Manager in April

2002 and was appointed as Chief Financial Officer

in August 2002. The announcement of Dean’s

appointment as Deputy Chief Executive Officer was

made in December 2008 and came into effect

April 2009.

† Non-executive director


UCS Group is an investment holding company for IT businesses with a primary focus on Software, Solutions and Services for selected markets.

John Bright CHIEF EXECUTIVE OFFICER

CHIEF EXECUTIVE OFFICER’S REPORT 13

OVERVIEW

The results for the 2010 financial year reflected the gradual

improvement taking place in market and trading conditions. It is

envisaged that the steady increase in economic activity will continue

into calendar 2011, hopefully indicating an end to the conditions

which prevailed across all of UCS’s activities during the global

economic downturn that characterised the 2008 and 2009 trading

years. It is heartening to see that the automotive sector, regarded as

an indicator of economic activity in South Africa, is experiencing

improved results.

Overall, the results for the year refl ected a gradual improvement in market and trading conditions for the Group. This occurred despite the strengthening of the Rand, which had a negative impact on the consolidation of the Group’s international operations as well as its domestic revenues associated with the sale of imported products.

Revenue growth for the year was 7,2% (organic 7,0%) whilst EBITDA

grew by 14,3%, reflecting a trading margin of 14,1% (2009 13,3%).

UCS reacted to the difficult trading conditions being experienced by

continuing the process of re-assessing its strategy and making

adjustments that management believed would set the company on a

growth path that could be sustained through 2011 and beyond.

FOCUS ON ANNUITY INCOME

Key actions taken included a critical review of our core businesses and

divisions. Disposals were undertaken to make revenue flows more

predictable, whilst other opportunities were measured on their ability

to generate ongoing annuity income for the Group.

These actions, together with a strong management focus on cost

containment, contributed positively to the improved earnings recorded

during the financial year.

One of the major decisions taken during the management business

review process was the disposal of the Group’s interest in UCS Solutions

Incorporated (‘UCS Solutions Inc.’) in Philadelphia, USA. This change

took effect on 31 August 2010, through entering into a management

buy-out agreement.

The decision was taken after much consideration was given to the

potential of UCS Solutions Inc. to change and evolve from a business

concerned only with projects into a strong, ongoing outsourced

application hosting and support relationship.

After examining this question, management took the decision to rather

reposition the Group’s interests in the USA market through a channel

partner relationship with UCS Solutions Inc. rather than have a direct

interest in the company.

This outcome was achieved by entering into a management buy-out

and implementing a reseller and a resource sharing arrangement. This

had the effect of further reducing the Groups exposure to the high-cost

overhead structures associated with non-predictable revenue streams.

In accordance with IFRS reporting standards, the results of this

disposed investment are accounted for as a discontinued operation.

Comparative figures have been restated accordingly.

The acquisition of Argility Limited was finalised in May 2010. During

the ensuing internal restructuring undertaken to consolidate the

Group’s ownership, management and development within the enlarged

Argility entity, the Group created a third reporting division.

The ‘Software Division’ includes the Aquitec operations previously

reported on under the Retail Solutions Division and the Cquential

business. The comparative year has been restated for current year

classifications.

SOFTWARE BUSINESS RESTRUCTURE AND CORDYS DEVELOPMENT

The Group has made sound progress in the consolidation of the

ownership, management, development and commercial exploitation

of the Group’s other retail software assets within an enlarged

Argility business.

The cost and efficiency benefits of this consolidation exercise are

expected to flow through in the medium-term with the elimination of

duplicate research and development expenditure across different

products. The main benefits are expected to materialise in the next

generation platforms, which will be expedited through the consolidation

of talent and IP resources.

The collaboration agreement entered into between the Group and Cordys in the Netherlands during February 2010, required a significant investment in educating and training the Group’s software engineering and support teams, so that they could acquire the competencies and expertise required for the Cordys software product range.

The Argility business is now well placed to incorporate the Cordys

technologies within the next generation product offerings. These will

come to the market when they are piloted in the furniture retail sector

by April 2011.

CHIEF EXECUTIVE OFFICER’S REPORT


ACQUISITIONS

WiWallet Mobile Payments (Proprietary Limited)

In respect of the loan facility entered into with WiWallet Mobile

Payments (Proprietary) Limited (‘wiWallet’), UCS exercised its rights in

terms of the option agreement whereby the agreed total start-up facility

of R1,76 million was converted into 40% in wiWallet, taking its total

equity ownership to 50% with effect from 27 October 2009.

In August 2010, UCS acquired a further 1% for a consideration of

R1,2 million resulting in a 51% equity ownership in wiWallet.

Lifeworld Group (Proprietary) Limited

With effect from 30 November 2009, UCS entered into a Sale of Shares

Agreement whereby it increased its 51% interest in the Lifeworld

Group (Proprietary) Limited (‘Lifeworld’) to 100%, for a nominal

consideration. The company subsequently changed its name to

Innervation Value Added Services (Proprietary) Limited.

With effect from 1 December 2009, Lifeworld acquired the going

concern business referred to as the Radical Business Unit from

Dynamic Visual Technologies (Gauteng) (Proprietary) Limited for a total

cash consideration of R1,5 million, net of working capital requirements.

Volume and Affinity Risk Management (Proprietary) Limited

On 9 April 2010, UCS entered into a Sale of Shares Agreement for the

acquisition of 51% of the issued share capital of Volume and Affinity

Risk Management (Proprietary) Limited for a purchase consideration

of R1 million, with a further potential upside payment limited to a

maximum of R5 million.

Cquential Solutions (Proprietary) Limited

Effective 30 April 2010, UCS entered into a Sale of Shares and Claims

Agreement with the Industrial Development Corporation of South

Africa Limited (‘IDC’) to acquire 49% of the issued share capital of

Cquential Solutions (Proprietary) Limited (‘Cquential’) and all claims

which the IDC may have against Cquential, for a purchase consideration

of R12 million with a further potential upside payment capped at

R10 million.

UCS further entered into a Sale of Shares Agreement with the remaining

shareholders of Cquential, predominantly management, to acquire

a further 7% equity interest in Cquential for a nominal purchase

consideration of R28. In addition, UCS committed itself to provide

working capital funding limited to a maximum of R15 million.

Argility (Proprietary) Limited

On 15 March 2010, UCS announced it had formally submitted to the

Argility Limited (‘Argility’) board of directors a notice of its firm intention

to make an offer to the Argility shareholders to acquire the issued

ordinary share capital in Argility held by them. This was to be achieved

by way of a scheme of arrangement in terms of Section 311 of the

Companies Act No 61 of 1973, as amended (‘Companies Act’).

Following approval by more than 90% of the UCS shareholders, who

were entitled to vote at the UCS general meeting held on 12 April 2010,

and the 100% approval of the scheme by Argility shareholders present

or represented by proxy at the general meeting held on 11 May 2010,

the court granted an order sanctioning the scheme in terms of Section

311 of the Companies Act on 18 May 2010.

Accordingly, with effect from 1 June 2010, UCS acquired the entire

issued share capital of Argility, which shares were acquired in terms of

the scheme, for a cash purchase consideration of R1,55 per Argility

share being R44,2 million in aggregate.

DISPOSALS

UCS Solutions Incorporated

With effect from 31 August 2010, Universal Computer Software UK

(‘UCS UK’), a wholly owned subsidiary of UCS Group, disposed of its

entire 92,5% equity interest in UCS Solutions Inc to the management

shareholders who held the remaining 7,5% for a nominal consideration

of $1.

UCS Dynamics Software Solutions (Proprietary) Limited

With effect from 30 September 2010, UCS disposed of 30% equity

interest to the management members of UCS Dynamics Software

Solutions (Proprietary) Limited for a consideration of R2,25 million

reducing UCS Group’s interest in UCS Dynamics to 70%.

TSS Managed Services (Proprietary) Limited

Prior to the 2009 financial year end, UCS Solutions Holdings

(Proprietary) Limited concluded a Share Purchase and Repurchase

Agreement with Tactical Software Systems (Proprietary) Limited and

TSS Managed Services (Proprietary) Limited (‘TSSMS’) whereby

UCS Solutions Holdings agreed to dispose of its entire 60%

shareholding in TSSMS by way of the repurchase and the share sale,

in one composite transaction.

The total potential transaction consideration (inclusive of a potential

upside capped at a maximum further R45 million) could be R125 million

(excluding interest and dividends). The transaction was approved by

shareholders at a general meeting held on 3 November 2009 which

represented the final suspensive condition to concluding the transaction.

PROSPECTS

The outlook for the domestic retail market is favourable, with retail

business confidence improving and consumer spending forecast to

show another year of positive growth in 2011, albeit possibly at a

slower rate than in 2010.

Internationally, the outlook is highly variable and dependant on

particular markets.

European retail sales are expected to show very marginal growth,

which will come under further pressure due to various austerity

measures in place.

The US retail market is also forecast to be sluggish, due to continuing

consumer caution and a shift to higher saving patterns. Further

consolidation in the retail sector is likely.

The BRIC countries are forecast to continue recovering strongly but

there are significant challenges in accessing the retail sectors in India

and China.

CHIEF EXECUTIVE OFFICER’S REPORT continued

CHIEF EXECUTIVE OFFICER’S REPORT 15

A similar focus will be applied to certain VAS businesses to achieve

monthly profitability in 2011, although the risk profile is very different

to that of the Software Division’s, with downside risk that is relatively

limited when compared to upside potential.

Overall, whilst retail market conditions look promising to neutral, it must

be emphasised that trading conditions can change very rapidly. In

addition, currency fluctuations make planning very challenging.

Based on current visibility, budgets and business plans, management

is cautiously optimistic that the UCS Group will generate good growth

in all main criteria of sales, earnings and cash flows for the year to

September 2011.

APPRECIATION

I would like to express my gratitude and thanks to all our staff for their

loyalty and commitment to going the extra mile in the line of duty, to our

customers for allowing us the privilege of doing business with them, and

also our suppliers for the products and services that they provide us.

Finally, my gratitude goes to my management colleagues and the Board

of Directors for their valued support, wisdom and guidance.

The Group’s core solutions and services businesses are all well placed, both strategically and operationally, well managed by experienced teams and have the solid foundations for further growth in the year ahead.

The management team’s major and immediate focus will be on getting

the new enlarged and consolidated Argility software business to achieve

monthly profitability during the new financial year.

This will be achieved whilst achieving aggressive delivery targets for

new product releases built on the Cordys business operations platform.

In addition, the start-up Cquential SaaS business is wholly based on

annuity revenue models and is currently planned to achieve monthly

profitability by the third quarter of 2011.


HEADING

The decision to reposition the division was aimed at signifi cantly reducing the division’s exposure to major once-off projects. This strategic change was accompanied by a focus on applying resources to the growth and extension of annuity-based services to provide a smoother source of sustainable income to the division.

Neil Michelson COMMERCIAL DIRECTOR


REVENUE UP 11%

TO R766 MILLION (2009: R691 MILLION)

NORMALISED EBITDA UP 43%

TO R92,7 MILLION (2009: R64,7 MILLION)

REFLECTING A 12,1% MARGIN (2009: 9,4%)

NORMALISED PBIT UP 113% TO R61 MILLION

(2009: R28,6 MILLION) REFLECTING A 8,0%

PBIT MARGIN (2009: 41,1%)

RETAIL SOLUTIONS DIVISION REPORT

RETAIL SOLUTIONS DIVISION REPORT 17

OVERVIEW

During the year under review, the Retail Solutions Division enjoyed

good revenue and margin growth, benefitting primarily from organic

growth achieved through ongoing strong relationships with existing

customers, as the market, still somewhat limited because of the

prevailing economic climate, presented limited opportunities to win

new customers.

Organic growth was supported by a strategic operational decision

taken in 2009 to reposition the division for annuity based services.

OPERATIONAL REVIEW

The division is in the process of closing out two onerous projects. The

process should see the projects completed early in the 2011 financial

year, following which the division will reap the benefits of these projects

evolving into their annuity income phase, the ongoing support and

maintenance relationship.

The delay in project delivery has had a direct impact on margins as

more costs are incurred to deliver, there is a deferral in the trigger for

annuity revenues and resources are tied up and not available for

reallocation to new revenue generating projects. Given the fact that

these projects are likely to be delivered in early 2011, the division is

positioned to show an improvement in margins and profitability.

BENEFITS

The lessons learned, although costly, have resulted in several benefits.

The division’s contracts have been critically examined and re-structured.

Now more conservative, the contracts also limit and manage the risks

associated with these projects more effectively, particularly during

critical stages of a project, where risk exposure normally increases.

On the plus side, all but one of the projects that were undertaken have

been converted into long-term service relationships that will benefit the

company and shareholders. Typically, these relationships based on the

solutions provided, continue for between seven and ten years before

upgrades are considered. The incumbent service provider, because of

their long associations with the company concerned, is then usually

favourably considered when replacement solutions are required. Long

term returns can therefore be very meaningful.

The implementation of the decision to concentrate on the development

of annuity projects also saw a fundamental repositioning of UCS

Solutions in the United States of America through the disposal of its

stake in UCS Solutions Inc. (‘UCS Inc’) to management.

This change resulted in the restructuring of the relationship between

UCS Solutions and UCS Inc. UCS Inc. is now a licensed reseller that is

positioned to sell the ‘Ready to Retail’ template in the North American

markets. Simultaneously, UCS entered into a formal resource sharing

relationship that will be beneficial to the operations of both companies.

DEVELOPING PRODUCTS AND MARKETS

During the year, the division continued to make significant investments

in developing an integrated SAP (Ai0) interface. This will enable UCS

to provide tailored solutions to the building suppliers and pharmacy

markets. These investments in the development of the solution have

resulted in new customers from both market sectors. The division is

also well positioned to add further SAP (Ai0) integrated solutions

to other retail markets, particularly the fuel, cellular and furniture

industries. We believe that the division has the depth of skills required

to integrate in-store solutions with centralised ERP’s. This will continue

to be a key long-term focus area in developing new services and

growing the division’s market share in various economic sectors.

The HCL-Axon strategic partnership continued to add value to the

division. The first ‘earn out’ from HCL-Axon took place during the year

and a further material final payment is expected during the coming

financial year. It is expected that the mutually beneficial relationship

will continue well into the future.

UCS continues to be well positioned to provide all the ongoing services

associated with post implementation projects in the Tier One retail sector

and also offers attractive solutions for the retail sector, particularly those

in developing and emerging economies. This is especially the case on

the African continent.

The UCS Group currently has software applications in eight African

countries, and the the Retail Solutions Division added four more

strategic African partnerships during the year.

With the African continent enjoying economic growth and proving

increasingly attractive to international investors, it can be expected that

this prosperity will filter down to consumers, many of whom will enjoy

increased levels of discretionary spending power. This, in turn, will

benefit retailers and provide new opportunities in Africa for the division.

ISO 2000 CERTIFICATION

Quality and consistency of business processes are essential ingredients

in the development of a relationship of trust with suppliers and

customers. It was therefore a matter of pride that the Infrastructure

Division within UCS Solutions achieved their ISO 2000 certification.

Besides offering benefits within the company, the certification offers

significant benefits when providing infrastructure hosting services for

Tier One retailers. As the certification confirms that mature and formal

processes are in place, it offers customers ‘peace of mind’ through the

knowledge that their operation critical investments are being made

with an outsourcing partner that embraces world class standards.

LOOKING AHEAD

During the final quarter of the financial year there was a notable increase

in the number of projects initiated by customers and entrusted to the

companies that comprise the division.

The pipeline for future projects also began to improve as customers

began considering the revival of projects that had previously been

identified and planned, but had been postponed due to prevailing tough

economic conditions.

We will continue to drive additional value and services within the

competitive retail sector to ensure that the growth in revenues

outperforms those of our competitors.

We are confident that 2011 will be profitable for the division and that

turnover and margins will continue to increase in a market that is

returning to its former strength.


The Investments Division has shown reasonable growth on an aggregated basis realising attractive EBITDA margins whilst continuing to invest behind the exciting value added services initiative.


REVENUE UP 11%

TO R372 MILLION (2009: R335 MILLION)

NORMALISED EBITDA UP 13%


REFLECTING A 24,4% MARGIN (2009: 24,2%)

NORMALISED PBIT UP 9,5% TO R65,4 MILLION

(2009: R59,7 MILLION) REFLECTING A 17,6%

PBIT MARGIN (2009: 17,8%)

Dean Sparrow DEPUTY CHIEF EXECUTIVE OFFICER

INVESTMENTS DIVISION REPORT

INVESTMENTS DIVISION REPORT 19

BUSINESS UNITS WITHIN THE INVESTMENTS DIVISION

The Investments Division comprises business units that are categorised

into one of the following three groupings; the retail software assets, the

value added services assets or other investments. This is consistent

with the 2009 financial year.

The retail software assets, however, no longer include UCS Software

Manufacturing. This change occurred following the acquisition of

Argility Limited, the creation of the enlarged software business and the

set-up of the stand-alone Software Division. Only GAAP Point-of-Sale

and Ultisales Retail Software remain within this category.

The value added services assets consist of Destiny e-Commerce, which

following the move of the Destiny Switch business into Innervation

Value Added Services (formerly Lifeworld) at the end of the financial

year, now only houses the going concern business of CSC. The other

businesses in this category include WiWallet, Volume and Affinity Risk

Management and 4Life.

WiWallet, the mobile application and transaction interchange, is a

business that was funded by UCS from December 2007 through a

convertible loan and a 10% initial equity position. During the current

financial year, the decision was taken to convert the loan funding into

a further 40% equity ownership in the business, which was then

subsequently increased by a further 1%, bringing the total equity

owned by the Group up to 51%.

The remaining assets within the Investments Division then fall into the

category, other investments, and include Accsys, Universal Knowledge

Software, UCS Dynamics, Fernridge and UCS Mobiliti.

STRATEGIC REVIEW

Within this division, and subsequent to the creation of the enlarged

software business, which is now reported under the separate Software

Division, the key strategic domestic growth focus is the appropriate

positioning and execution of the value added services initiative.

The value added services initiative

The Group has continued to invest in the extension of its service and

product lines. Good progress has been achieved, particularly in regard

to building of our Value Added Service (VAS) offerings for the retail

value chain in the South African market.

A number of small but strategic acquisitions were concluded during

the year under review with the purpose of building the offering further,

as well as appropriately positioning the go-to-market vehicle for the

VAS initiative.

These acquisitions, referred to in the CEO’s review in this report,

included the purchase of the remaining 49% interest in Lifeworld.

The name of this company was then changed to Innervation Value

Added Services.

Innervation acquired the going concern business of The Radical

Business Unit from DVT for the benefit of owning the member

management and treasury application for loyalty programmes. A 51%

interest was acquired in Volume and Affinity Risk Management

introducing financial services/insurance products for retail to be promoted

at point-of-sale.

The VAS unit’s vision is to offer customers a choice of value added

products facilitated through a single platform. This will allow them to

achieve accelerated and sustainable business growth by delivering

innovative, consumer focused solutions across all channels that

enable our clients to continue to acquire, manage, retain and grow

profitable customers.

This will be achieved by providing thought leadership and technical

services that will deliver transactions and value added services

across multiple channels through a single, well supported and

integrated platform.

We will assist our clients to improve efficiencies and increase traffic

and transactions through the use of a broader range of products

and services.

The ultimate intention is to increase our clients’ profitability and improve

customer loyalty by providing convenience and value to their customers.

Operational highlights

GAAP Point-of-Sale was the growth performer of the division during the

year under review. It increased revenue by 35% on the prior year,

driven largely as a result of the activity generated within the hospitality

sector in the run-up to the FIFA world cup.

Ultisales Retail Software was able to successfully launch Argility’s new

product, Ultisales version 5, to the tier 3 and tier 4 retail market which

provides the South African and sub-Saharan African resellers an

exciting new product roadmap.

CSC, the secure payment terminal business, saw the number of devices

sourced and supplied during 2010 increase by 14%. This growth was,

however, negatively affected in terms of actual revenue realised as a

result of the strengthening in the Rand/Dollar exchange rate.

Accsys, the HR, payroll and time and attendance business, saw revenue

growth of almost 12% with a substantial improvement in margins

and associated profitability given the favourable mix in revenue growth

weighted towards the sale of new generation proprietary software.

The combined VAS initiative (excluding CSC) ended the year having

largely completed the appropriate positioning of its technology

enablement capability. The other investments performed satisfactorily

during the year.

Prospects

CSC, which represents the major portion of the investments division, in

terms of revenue generation and profit contribution is poised for a sound

2011 financial year due to a strong order book and robust pipeline.

The balance of VAS is expected to start contributing meaningfully in

the new financial year, as some tier one retail clients have already

indicated that they will be utilising the proposed integrated value

added services platform for the facilitation of various value added

services in-store.

WiWallet has seen significant interest and strategic partnership

approaches, which bodes well for the achievement of its current

business plan. This business is expected to breakeven on a per month

basis by the end of the 2011 financial year.

Given the above, the Division is expected to show better revenue

growth and EBITDA generation in the new financial year.


HEADINGSOFTWARE DIVISION REPORT

John Bright CHIEF EXECUTIVE OFFICER


TURNOVER DOWN 10,7%


EBITDA DOWN 37,9%


PBIT DOWN 78,6%

TO R3,7 MILLION (2009: R17 MILLION)

THE CORDYS PARTNERSHIP

More than 500 ‘man days’ were invested in training staff on Cordys products. This involved staff

drawn from all parts of the business who participated in 10 ‘boot camps’ that were held in

major centres in South Africa and the UK.

Extensive market research was undertaken through a special ‘customer interview project’, which

was instigated to ascertain market needs and identify key opportunities for Cordys collaboration.

A ‘think tank’ of commercial product managers was arranged to assist with the development of a

product strategy and provide a guide for further software investments.

SOFTWARE DIVISION REPORT 21

A TIME OF CHANGE

During the year, the Software Division underwent extensive

organisational and management changes. These changes, contributed

to higher costs, but, more significantly, because of the management

commitment required, diverted focus from core operations. This partly

resulted in reductions in turnover and profitability by the division

during the year.

Whilst annuity revenues experienced modest growth, the impact was

felt on new software sales which were significantly lower across all

product lines.

These negative developments are, however, of a temporary nature

which will be overcome by the business advantages that will be

experienced in future by combining all the software assets of the UCS

Group into a single entity. The most significant benefit will be a

streamlined approach to managing the division and its products, which

will deliver commercial benefits.

SIGNIFICANT TRANSACTIONS

As part of the strategic re-positioning several transactions were

concluded. These will play a major part in the consolidation process

and undoubtedly contribute to a more efficient operation.

The major acquisition was that of Argility, which was selected as the

entity on which the formation of the new, enlarged software business

would be based.

This transaction made a R3 million negative contribution to PBIT.

Turnover was negatively impacted on by the conversion of outsourced

development contracts between the Software Division and Argility,

which have now become internal service contracts. Additional

amortisation of R3,2 million was applied as a result of Argility’s intangible

assets brought back on balance sheet through the acquisition.

Cquential was acquired in April 2010. This resulted in a negative

contribution of R2,5 million to PBIT. Additional amortisation of

R2,7 million was realised as a consequence of Cquential’s intangible

assets acquired.

In February 2010, the Software Division entered into a software

agreement with Cordys. In terms of the agreement, the Cordys software

may be embedded in Argility’s products and sold internationally under

licence. This represents a significant transaction for the Division that

creates worldwide opportunity for its product lines.

OPERATIONAL HIGHLIGHTS

Although the year was dominated by activity which will reposition

the Software Division as a competitive, focused software entity in the

future, several significant milestones were achieved. These were:

BUSINESS REORGANISATION

More than 250 staff members were impacted on by the business

reorganisation process. All now operate within a new entity driven by

new management structures, a focused operating model and KPI’s.

Non-software based services were separated from UCS Software.

A new entity to house these services, together with the services of

CKS, namely UCS Technology Services, was created for this purpose.

STRATEGIC REVIEW

The core focus of the Software Division in 2011 will be to become cash

flow positive by the end of the financial year.

Specific strategies are already in place to rationalise operational

expenditure and achieve sales growth both through traditional

channels and through the launch of the Retail Operations Platform

(‘ROP’), a new product line.

The ROP underwent an incubation phase lasting several months. The

product, which will be formally introduced at the National Retail

Federation in New York in January 2011, is a significant development

for UCS.

The new product line leverages the strong market position of the

Cordys Business Operations Platform (‘BOP’) and extends it with retail

specific content from the Software Division.

A roadmap for the first release of ROP in March 2011 will be

announced at the National Retail Federation. This will be complemented

by further ROP releases featuring additional content and capabilities

throughout the remainder of 2011.

PROSPECTS

The increasing rate of adoption of Service Oriented Architecture (‘SOA’)

in enterprise systems is recognised throughout IT analyst circles

across the world. This phenomenon was an integral part of the

Software Division’s decision to re-factor its retail IP and take it to the

market as a ROP.

Argility has a ‘lighthouse’ customer in South Africa using the Cordys

product in a live operation, and has several other prospects presently

being evaluated.

Collaboration has commenced with the Value Added Services (‘VAS’)

division to deliver consumer transacting on mobile phones which has

met with positive market response.

The World Wide Chain Stores (‘WWCS’) product, which is currently

owned and operated by Aquitec UK, will be assimilated into the

Software Division by April 2011. Plans are in place to introduce

Cordys technology into WWCS specifically in the area of business

optimisation through activity monitoring.

Cquential offers ‘Software as a service’ (‘SaaS’) for warehouse

management. This is a uniquely competitive commercial model that is

gaining traction in the market and will become cash generative when

it has reached a critical mass of customers.


HEADING

Following the acquisition of Argility Limited fi nalised in May 2010 and the ensuing internal restructuring to consolidate the Group’s ownership, management and development within an enlarged Argility, the Group has created a third reporting division named the ‘Software Division’.

Josephine Fortuin CHIEF FINANCIAL OFFICER

CHIEF FINANCIAL OFFICER’S REPORT 23

Prior year income statement figures have been restated to exclude the

earnings result of the disposed operation of UCS Solutions Incorporated

(‘UCS Solutions Inc.’), the SAP All-in-One practice in which Universal

Computer Software UK Limited (‘UCS UK’), a wholly owned subsidiary

of UCS Group Limited (‘UCS Group’ or the ‘Group’) disposed of its

92,5% equity interest to the remaining management shareholders,

effective 31 August 2010. On this basis and in accordance with IFRS,

the results of UCS Solutions Inc. are disclosed, net of tax, as ‘profit

from discontinued operations’ in the statement of comprehensive

income for the current and comparable period.

Revenues from continuing operations were up 7,2% to R1,3 billion (2009: R1,2 billion). Revenue growth is mainly organic, with less than 0,2% attributable to acquisitions. Annuity revenues showed growth of 5% to R726 million (2009: R691 million) representing 55% (2009: 55,4%) of total revenues.

Normalised profit from operations before interest, depreciation,

amortisation, impairments and foreign exchange differences (EBITDA)

increased by 14,3% to R186,9 million (2009: R163,5 million)

reflecting a margin of 14,1% (2009: 13,3%). UCS Solutions

(Proprietary) Limited (‘UCS Solutions’), an indirectly held wholly

owned subsidiary company of UCS Group, earned a net R12,4 million

upside payment on the achievement of the first year’s revenue target

for the annual period ended 31 July 2010 applicable to the disposal of

the Enterprise Solutions division (‘ES division’) of UCS Solutions to

HCL-Axon (Proprietary) Limited in the prior year.

Together with the foreign exchange losses, which are mainly unrealised

on the translation of foreign loan accounts with subsidiary companies,

totalling R8,2 million (2009: R10,6 million), the upside profit related

to the ES division have been excluded from normalised EBITDA

and PBIT. Normalisation adjustments in the prior year relate to the

impairment of intangible assets and goodwill of R8 million and foreign

exchange losses.

Normalised PBIT increased by 21,9% to R115 million (2009: R94,4 million)

reflecting a margin of 8,7% of revenues versus a comparable 7,7% in

the previous year.

Finance charges, net of interest and investment revenues, decreased

by 74,1% to R4,7 million (2009: R18 million). The substantial decrease

is due to the Group’s reducing interest bearing debt as well as the

R3 million dividend earned on the preference shares issued to UCS

Solutions Holdings (Proprietary) Limited, a wholly owned subsidiary of

UCS Group, as part consideration for the entire 60% equity interest

in TSS Managed Services (Proprietary) Limited (‘TSSMS’), disposed

of effective 1 October 2009.

Taxation charges (including capital gains tax, STC and withholding

taxes) increased by 33,6% to R43 million (2009: R32,2 million)

comprising normal taxation of R42,8 million (2009: R33,3 million) and

deferred tax of R0,2 million (2009: credit R1,1 million), representing

an effective tax rate of 37,5% (2009: 55,9%) for the year. Excluding

losses included in profit before tax for which no tax benefit has been

accrued as well as other once-off related tax charges, the normalised

effective tax rate is calculated at 29% (2008: 30,1%).

The current year loss from discontinued operations relates entirely to

the operating and disposal result of UCS Solutions Inc whilst the prior

year profit from discontinued operations, restated for the operating

result of UCS Solutions Inc, includes the after tax income of DiverseIT,

the ES division and TSSMS.

Profit attributable to UCS shareholders of R39,6 million, after minority

interest, represents an increase of 44,4% from the comparable

prior period.

Earnings per share, including discontinued operations in the current

and prior years, increased by 46,3% to 13,9 cents (2009: 9,5 cents).

The difference between earnings per share and headline earnings per

share relates mainly to the aforementioned upside payment associated

with the ES division, net of taxation effects, equating to 3,8 cents and

the impairment and equity losses recognised associated with the

disposals effective in the year equating to 6,2 cents. Headline

earnings per share increased 42,1% to 16,2 cents (2009: 11,4 cents).

In the current year the capital expenditure of R49,4 million, largely

driven by infrastructure and hardware related investments backed by

customer utilisation and contracted requirements, is congruent with

the annual depreciation for the year of R45,2 million as well as

disposals of R7,9 million.

The increase in goodwill of R11,2 million, associated with the

acquisitions detailed below, was offset by the goodwill associated with

UCS Solutions Inc. written off on disposal of R10,4 million.

The substantial increase in intangible assets, after amortisation of

R26,6 million, relates predominantly to computer software and

associated capitalised development costs acquired on the acquisition

of Argility Limited and Cquential Solutions of R81 million as well as to

approved capital expenditure of R24 million, of which R8,4 million

relates to development costs capitalised.

The increase in investments and loans receivable is attributable to

redeemable preference shares in Tachcal Software Systems

(Proprietary) Limited of R30 million, on which a dividend is earned

annually, for the period the shares are in issue, based on pre-

determined annual performance thresholds.

Total borrowings decreased by 22,6% from R180 million to

R139 million of which R110 million (2009: R141 million) represents

external financial institution debt contributing to the 25% improvement

in the Group’s debt/equity ratio from 36% to 27%.

Excluding receivables held for sale in the prior year, trade receivables

decreased by 5% due to improved collections supported by the

improvement in debtors’ days from 52,2 days to 49,9 days.

CHIEF FINANCIAL OFFICER’S REPORT


Cash generated from operations, which includes discontinued

operations, is down 26,1% to R172,4 million (2009: R233,5 million).

Excluding the contribution of discontinued operations in the prior year

for comparative purposes, as well as the cash effect of an upfront three

year licence deal of R33 million included in cash generated from

operations in the previous year, of which one third is included in

EBITDA in the current year, cash generated from operations would be

2,3% improved on the previous year.

A net R32,5 million was realised by the Group in the year on the

disposal of TSSMS while R73,3 million was invested in capital

expenditure for the same period. R49,4 million was applied to funding

acquisitions of which Argility Limited comprised R44,2 million.

The Group applied R110 million (2009: R66,4 million) to financing

activities reducing bank borrowings as well as settling vendor

obligations of R21,7 million following the achievement of warranted

profit targets.

The staff complement at the end of September 2010 was 2 315

(2009: 2 270 – restated to exclude TSSMS and UCS Solutions Inc).

CHIEF FINANCIAL OFFICER’S REPORT continued

Board constitution

The Board operates a unitary board, consisting of five executive and

six non-executive directors, five of which are independent.

The roles of Chairman and Chief Executive Officer are occupied by

different directors.

The Board Chairman is an executive director.

The non-executive directors bring a diversity of experience, insight and

expertise on independent judgement on issues of strategy, performance

and standards of conduct. The Board believes it has sufficient

skills and experience to balance conformance to governance and

entrepreneurial performance.

Company Secretary

The Company Secretary provides guidance to the Board as a whole

and to individual directors, in the discharge of their responsibilities.

The Board believes that the Company Secretary is empowered to fulfill

his duties and is satisfied that he discharges his responsibilities in a

meaningful and complete manner.

Access to information

Directors have full and unrestricted access to all relevant company

information.

Non-executive directors enjoy unrestricted access to executive

management and meet with them to discuss company affairs on a

frequent basis.

All directors have unrestricted access to independent professional

advice at the Company’s expense.

Conflicts of interest

The directors declare possible conflicts of interest, recuse themselves

from further discussion or voting on the matter, and ensure that such

declarations are recorded in the minutes. There were no material

conflicts of interest declared during the year under review.

Succession planning

The Board participates in the succession planning for key senior

executive positions.

The directors periodically discuss succession planning and are

comfortable that in the event of executive and senior management

transition, plans are in place to ensure a smooth transition.

Directors’ appointments

Directors are appointed and re-appointed, on a three-year cycle

rotational basis by shareholders. Ms Chetty and Messrs Coles,

Goodman and Michelson retire by rotation, but offer themselves for

re-election.

Other directorships

The Board believes that other directorships held by directors do not

affect their ability to fully discharge their responsibilities as directors of

UCS Group Limited.

Board meetings

The Board met four times during the year under review. All directors

are encouraged to attend each meeting and gatherings where their

presence is required.

UCS Group Limited (‘UCS’) complies in all material respects with the

principles and spirit of the Code of Corporate Practices and Conduct

contained within the King Report on Corporate Governance for South

Africa 2009 (‘King Report 2009’). Variations from compliance are

outlined below.

The Board is committed to applying and enforcing appropriate

corporate governance principles, policies and practices within each of

the Group’s operations. Ultimately, the Board is the focal point of the

Group’s corporate governance system, and is accountable and

responsible for ensuring compliance with the King Report 2009.

The Group is in the process of reviewing the requirements set out in

the King Code of Governance for South Africa, 2009 (the King III

Report) and will measure itself against these principles. Existing

governance practices are being reviewed to ensure responsible

qualitative or alternative compliance that is in the Group’s best

interests. In its approach, the Board will remain mindful of its

responsibility to and of the interdependency and interaction between

the triple ‘Ps’ (People, Planet and Profits) as the foundation for

sustainable value creation, ensuring an entrepreneurial culture that

identifies and operates within acceptable risk levels at the same time

progressing transformation at all levels.

THE GROUP’S TARGETS

The Group seeks to add value by addressing the needs of our customers,

employees and stakeholders, acknowledging our responsibility to society

at large, while growing and ensuring profitability of our business.

The vision of UCS is to become an international leader in the provision

of Software, Solutions and Services for the retail value chain.

The Board, committees, executives and employees of UCS are devoted

to achieving the highest standards in corporate governance, corporate

responsibility, risk management and social responsibility.

The Board of Directors is responsible to the Company’s shareholders

for the oversight and implementation of governance, in the conduct

of business.

THE CONSTITUTION AND OPERATION

OF THE BOARD OF DIRECTORS

The Board:

is accountable and responsible for the performance and affairs of

the Company;

has adopted a charter outlining its responsibilities;

takes responsibility for guiding and monitoring compliance with all

applicable laws, regulations and codes of business practice;

delegates responsibilities for compliance on an operational basis to

senior management and maintains oversight thereof;

has defined levels of materiality for the business;

has delegated relevant matters to the executive directors and senior

management based on detailed authority levels;

believes it has full and effective control over the Company and

oversight of management activities.

CORPORATE GOVERNANCE STATEMENT 25

CORPORATE GOVERNANCE STATEMENT


Other duties of the Audit Committee include the following:

Nominating the external auditor for appointment as auditor of the

Company;

Verifying the independence of any proposed appointee as

auditor, before the appointment becomes final;

Approval of the audit fees;

Specifying the nature and extent of non-audit services;

Pre-approval of contracts for non-audit services;

Dealing with concerns or complaints relating to the following:

accounting policies

internal audit

the audit or content of Annual Financial Statements

internal financial controls

Evaluating the effectiveness of risk management, controls and

governance processes;

Evaluating the competence of the Chief Financial Officer

Remuneration Committee

Messrs P Terblanche (Chairman), JR Claassen and BP Hattingh are

members of the Remuneration Committee which considers the

conditions of employment and remuneration packages for UCS’s key

executive management and non-executive directors.

Risk Management and Internal Control

The Board is responsible and accountable for risk management and

internal control.

Executive management, under the Board’s oversight, assumes

responsibility for the integration of risk practices into operational

activities.

The Board is satisfied that management is attuned to both the negative

and positive aspects of business risk. The Board believes it has

adequate information to facilitate a balanced assessment and the

management of significant risks through effective internal control

systems.

The Group maintains systems of internal control over financial

reporting and the safeguarding of assets against unauthorised use,

acquisition or disposal. PricewaterhouseCoopers Inc. (‘PWC’) were

assigned the responsibility for the Group’s internal audit function for

the financial year under review and reports functionally to the Audit

and Risk Committee and administratively to the Chief Financial Officer.

The Audit Committee approves audit plans for UCS and its subsidiaries

annually. Follow-up audits are conducted in areas where major

weaknesses are identified.

In the current year, in accordance with the recommendations contained

in Chapter 7 of the King III Code on Corporate Governance, PWC

performed a review of the internal financial controls of the major

subsidiary companies of the Group. A written assessment on the

adequacy of internal financial controls was issued to the Audit and

Risk Committee whereby PWC confirmed that the controls that

were tested, were operating with sufficient effectiveness to provide

reasonable, but not absolute assurance, that the control objectives

were achieved for the period under review.

Details of Board meeting attendance for the year under review are as

follows:

Board

Audit & Risk

Committee

Remuneration

Committee

Attended/

held

Attended/

held

Attended/

held

Executive directors:

Mr JD Bright 4/4

Mr DF Coles 4/4

Ms JP Fortuin 4/4

Mr NA Michelson 4/4

Mr DC Sparrow 4/4

Non-executive directors:

Mr J Claassen 4/4 2/2

Ms V Chetty 4/4

Mr RG Goodman 4/4 5/5

Mr BP Hattingh 4/4 2/2

Mr MPR Morojele 4/4 5/5

Mr P Terblanche 3/4 5/5 2/2

Board Committees

The Board has two Board Committees, namely the Audit and Risk

Committee and the Remuneration Committee, which cover defined

responsibilities. The Chairman of the Audit and Risk Committee is

Mr MPR Morojele, an independent non-executive director. The Chairman

of the Remuneration Committee is Mr P Terblanche, an independent

non-executive director.

Both Committees operate in accordance with terms of reference

approved by the Board and report to the full Board.

The Board is satisfied that its Committees have fulfilled their responsibilities

as set out in their respective terms of reference for the year under review.

Professional Advice

The Board and its Committees have unimpeded access to independent

outside professional advice.

Audit and Risk Committee

Messrs MPR Morojele, RG Goodman and P Terblanche are members

of the Audit and Risk Committee and are financially literate. All the

members attended the five meetings held during the financial year

under review.

In line with the requirements of section 269A of the Companies Act, as

amended by the Corporate Laws Amendment Act 2006, the Audit and

Risk Committee confirms the following:

The duties of the Audit Committee include the need to prepare a

report for the Annual Financial Statements on:

how the audit committee carries out its functions;

whether or not the auditor is independent;

its findings with regard to:

the Annual Financial Statements

accounting practices utilised in the preparation of the Annual

Financial Statements

internal financial control

the going concern nature of the Company

CORPORATE GOVERNANCE STATEMENT continued

CORPORATE GOVERNANCE STATEMENT 27

ACCOUNTING AND AUDITING

The Audit and Risk Committee plays an active role in deliberations

relating to the appointment of, and non-audit services provided by, the

external auditors.

The Board is aware of its responsibility pertaining to the preparation

and contents of the Annual Financial Statements.

The external auditors enjoy unrestricted access to the Audit and Risk

Committee, the Chairman of the Audit and Risk Committee and the

Chairman of the Board.

DISCLOSURE PRACTICES

The directors are responsible for the preparation of the Company’s

Annual Financial Statements. The directors believe that the Annual

Financial Statements fairly present the state of affairs of UCS and its

subsidiaries as at the end of the financial year.

In terms of the JSE Limited Listings Requirements, compliance with

International Financial Reporting Standards (IFRS) is required for

financial years beginning on or after 1 January 2005. Accordingly the

Annual Financial Statements have been prepared in accordance with

and are compliant to IFRS.

GOING CONCERN

The Board believe that UCS will continue to be a going concern in the

foreseeable future, based on past performance, existing forecasts and

current cash resources.

AUDITORS

During the financial year under review, Deloitte & Touche acted as the

external auditors of the Company and has reported that the Annual

Financial Statements fairly present the financial position of the Company

and of the Group as at 30 September 2010.

The Board is satisfied that the Annual Financial Statements fairly present

the financial position of UCS as at 30 September 2010 and the profit

and loss and cash flows for the financial year ended 30 September 2010.

The audit report is presented on page 35 of this Report.

The Annual Financial Statements were approved by the Board on

23 November 2010.

The Board believes that in the financial year under review and up to

the date of approval of the Annual Report and Financial Statements,

UCS operated an adequate system of internal control to identify and

manage operational and financial risks. The system of internal control

is risk based, designed and regularly reviewed and tested to sufficiently

manage the Company risks that have a significant impact on the

business. The Board believes that the system of internal control

provides reasonable, but not absolute, assurance of the effectiveness

and efficacy of controls throughout the business.

SUSTAINABILITY

UCS has, during the year under review, placed an increased emphasis

on the non-financial value drivers of business, including, but not

restricted to, stakeholders such as shareholders, customers, employees

and government agencies. The focus includes socio-economic issues

such as community and individual development, employment equity

and occupational health and safety.

UCS will strive to behave and report to its stakeholders in a manner

that reflects how it practices its values in conformity with defined

principles in all activities.

The directors, who appreciate that these matters require on-going

development and flexibility, have, at the date of this report, concluded:

Health and Safety

While the business of Group companies does not pose a substantial

occupational health and safety risk, management ensures that

appropriate steps are taken to ensure safety in its buildings and

compliance with the occupational health and safety requirements.

Environment

While the nature of the business of the Group companies does

not result in environmental degradation, management constantly

monitors the effect of its business on the environment.

Social

The Group embraces the role it can play as a catalyst for change

within the markets its serves and supports a number of social

investment programs through the utilization of the skills and

resources available within the Group. A further report of the CSI

and enterprise development initiatives of the Group is presented on

page 28 of the Report.

Economic

UCS seeks to provide its clients with solutions in the information

technology field which will result in their having a lead over their

competitors.

Ethics

The Group recognises the vested interest of all stakeholders in the

manner in which its various businesses are conducted and is

committed to ethical behaviour at all levels of the Group. The Group

will initiate a project to formalize a code across the Group which

articulates the Group’s commitment to its stakeholders, comprising

its shareholders, customers, suppliers and broader community, as

well as policies and guidelines regarding the personal conduct of

management, officials and other employees.


THE PROGRAMME

Training at Zwelethu consists of point-of-sale, customer service and

call-centre courses. Of the courses, the point-of-sale material is

accredited with the necessary SETA and is presently undergoing the

process to be registered as a learnership. Steady progress is being

made with accrediting the call centre course with the Service SETA and

also registering it as a learnership. Once these steps have been

accomplished, the students will be able to benefit from material that

is relevant and competitive and also offers substantial incentive to

potential employers.

LESEDI SCHOOL

At the Lesedi School, Ms Laaka and four educators who assist 85

learners, have been working diligently after normal hours throughout

the year, preparing to write examinations in 11 school subjects.

Students writing examinations at the end of calendar 2010 are all

enrolled for the ABET (Adult Basic Education and Training) qualification

of the Department of Higher Education. The qualification covers four

levels, which are all offered by Lesedi. Learners attaining the ABET 4

qualification qualify for admission at Colleges for further education

and training.

Computer skills are offered through a computer school under the

auspices of Lesedi at campuses in Fontainebleau and Zandspruit.

Here students undertake comprehensive courses that have a duration

of six months and are presented in fully equipped computer training

centres. These centres feature state-of-the-art hardware and the latest

available software applications. A total of 86 students underwent

training during the 2010 calendar year.

SUCCESSES

The success of programmes offered at the various UCS supported

training facilities can be measured through the fact that of recent

graduates, 59 out of the 62 call centre agents trained were employed

by the JD Group. A further 85 students are currently busy with Adult

Basic Education and Training at the Lesedi School.

OVERVIEW

UCS, as a supplier of value added services to the retail industry,

recognises that it has a role to play in the prosperity of the sector.

Added to this role is an acknowledgement that because of our activities

and expertise, we have the knowledge to create opportunities for those

who, through no fault of their own, are not able to secure places for

themselves in the retail sector.

We therefore focus our corporate social investment programme on

creating ongoing opportunities for people to assimilate the technical

skills needed to operate within a retail environment.

We believe that by assisting with the creation of skilled ‘jobholders’ we

are making an effective contribution not only to society, but also to the

sector to which we owe our business success.

OBJECTIVES

The primary focus of the UCS corporate social investment programme

lies in training and skills development.

This occurs in the Zwelethu and Lesedi areas to the north of

Johannesburg and involves material that has been specifically

developed to train and improve the skills of young, unemployed

students. The beneficiaries of the programme are young people who

have been identified as having the potential to develop, but lack the

necessary financial means to obtain a formal education.

The training is made possible through a financial partnership involving

UCS, as sponsor and project owner, working in association with Equip,

a course development, SETA contact and training provider, and Homo

Novus, a company that is involved with the recruitment, placement

and also overall management of the programme. All partners play key

roles ensuring that the support and logistics required for the successful

implementation of the programme are maintained.

All training is undertaken in the knowledge that to be effective, the

services provided must be comparable to similar services supplied by

training service providers operating in the private sector.

CORPORATE SOCIAL INVESTMENT

REPORT OF THE AUDIT AND RISK COMMITTEE 29

4. FREQUENCY OF MEETINGS

The Audit and Risk Committee met on five occasions during the

financial year under review. Provision is made for additional meetings

to be held as and when necessary.

5. PERSONS ‘IN ATTENDANCE’ AND ‘BY INVITATION’

The internal and external auditors, in their capacity as auditors to

the Group, attended and reported to all meetings of the Audit and

Risk Committee.

The Chief Financial Officer and relevant senior managers attended

Audit and Risk Committee meetings on a ‘by invitation’ basis.

6. ALL MEETINGS INCLUDE A CONFIDENTIAL SESSION

Audit and Risk Committee meetings include a confidential session

between committee members and the internal and external

auditors.

Executive directors and senior managers are not present during

the confidential session.

7. INDEPENDENCE OF AUDIT

During the year under review the Audit and Risk Committee

reviewed reports by the external auditor and, after conducting its

own review, confirmed the independence of the Auditor.

8. EXPERTISE AND EXPERIENCE OF THE CHIEF FINANCIAL OFFICER

As required by JSE Listing Requirement 3.84(h), the Audit

Committee has satisfied itself that the Chief Financial Officer has

appropriate expertise and experience.

1. INTRODUCTION

The Audit and Risk Committee has pleasure in submitting

this report, as required by sections 269A and 270A of the

Companies Act.

2. FUNCTIONS OF THE AUDIT AND RISK COMMITTEE

The functions of the Audit and Risk Committee include:

2.1 Review of the interim and year-end financial statements,

culminating with a recommendation to the Board.

2.2 Review of the external audit reports, after audit of the interim

and year-end financial statements.

2.3 Review of the internal audit and risk management reports,

with, when relevant, recommendations being made to

the Board.

2.4 In the course of its review, the Committee:

takes appropriate steps to ensure that Annual Financial

Statements are prepared in accordance with International

Financial Reporting Standards (‘IFRS’);

considers and, when appropriate, makes recommendations

on internal financial controls and the going concern

assumption analysis;

verifies the independence of the external auditor and of

any nominee for appointment as external auditor;

authorises the audit fees in respect of both the interim

and year end audits;

specifies guidelines and authorises contract conditions for

the award of non-audit services to the external auditors;

evaluates the effectiveness of risk management, controls

and the governance processes;

deals with concerns or complaints relating to the following:

Accounting policies

Internal audit

The audit or content of Annual Financial Statements

Internal financial controls

considers reports on sustainability issues;

has initiated information technology risk management

procedures.

3. MEMBERS OF THE AUDIT AND RISK COMMITTEE

3.1 The membership of the Audit and Risk Committee currently

consists of three independent non-executive directors,

Messrs MPR Morojele (Chairman), RG Goodman and

P Terblanche;

3.2 The members of the Audit and Risk Committee have at all

times acted in an independent manner.

REPORT OF THE AUDIT AND RISK COMMITTEE


2010 2009

R’000 % R’000 %

Revenue 1 340 375 1 498 787

Cost of goods overheads and other expenses 491 260 572 960

Value added 849 115 925 827

Income from investments 9 165 6 855

Wealth created 858 280 100,0 932 682 100,0

Distribution of wealth

Employees

Salaries, wages and benefits 689 851 80,4 749 873 80,4

Providers of capital

Finance charges 13 835 1,6 23 748 2,5

Government

Taxation 42 811 5,0 41 764 4,5

Re-invested in Group activities 111 783 13,0 117 297 12,6

Deferred taxation 237 0,0 7 517 0,8

Depreciation and amortisation 71 904 8,4 82 334 8,8

Net profit for the year attributable to owners of the Company 39 642 4,6 27 446 2,9

Wealth distributed 858 280 100,0 932 682 100,0

* The value added statement includes amounts relating to continuing as well as discontinued operations.

VALUE ADDED STATEMENT for the year ended 30 September 2010

ANALYSIS OF KEY RATIOS 31

2010 2009 2008 2007 2006

Ordinary share performance

Weighted average number of shares in issue (’000) 284 653 290 147 287 560 267 098 243 134

Earnings per share (cents) 13,9 9,5 33,3 57,4 34,3

Headline earnings per share (cents) 16,2 11,4 31,9 34,7 21,6

Net asset value per share (cents) 170,3 165,0 165,3 136,5 120,8

Cash flow from operations per share (cents) 60,6 80,5 69,3 66,9 49,5

Dividends per share (cents)

Interim declared and paid 4,0 4,0 4,0 4,0 3,0

Final declared 5,0 5,0 5,0 5,0 4,0

Dividend cover 1,5 1,1 3,7 6,4 4,9

Profitability and asset management

Operating profit to revenue (%) 14,7 15,5 17,3 25,3 21,5

Return on total equity (%) 9,0 6,6 18,1 22,6 15,5

Asset turnover ratio (times) 1,8 2,0 1,8 2,0 2,1

Trade and other receivables days 49,9 52,2 60,4 55,6 53,4

Inventory turnover (times) 71,6 50,9 69,4 55,7 46,1

Current ratio (times) 1,2 1,3 1,2 1,1 1,4

Employees

Number of employees at year end 2 315 2 677 2 590 2 249 2 044

Revenue per employee (R’000) 579,0 559,9 473,3 476,0 388,1

Operating profit per employee (R’000) 85,2 86,6 81,9 120,3 83,6

* The key ratios are calculated using results from continuing as well as discontinued operations unless otherwise stated in the definitions below.

DEFINITIONS

The summary set out below incorporates definitions of terms used in this analysis of key ratios:

Net asset value per share

Equity attributable to equity holders of the Company divided by the number of shares at year end

Cash flow from operating activities per share

Cash generated from operations before working capital changes divided by the weighted average number of ordinary shares in issue

Return on total equity

The percentage of headline earnings to total equity

Asset turnover ratio

The current year’s revenue divided by the average operating assets

Operating assets

Total assets less investments, loans receivable, bank balances, current taxation receivable and deferred taxation

Trade and other receivables days

The average trade and other receivables divided by current year’s continuing operations revenue multiplied by 365

Inventory turnover

The average inventory divided by the current year’s cost of sales multiplied by 365

Current ratio

The ratio of current assets to current liabilities, excluding assets and liabilities classified as held for sale

Operating profit

The profit before finance charges, investment revenues, depreciation, amortisation, goodwill and intangible asset impairments and research and

development expenditure

Dividend cover

Earnings per share divided by dividends per share

ANALYSIS OF KEY RATIOS for the year ended 30 September 2010

FINANCIAL STATEMENTS 33

34 Directors’ responsibility and approval

34 Certificate of the company secretary

35 Independent auditor’s report

36 Directors’ report

38 Income statements

38 Statements of other comprehensive income

39 Statements of financial position

40 Statements of changes in equity

44 Statements of cash flows

45 Notes to the annual financial statements

98 Schedule of interests in subsidiary companies

Overall, the results for the year refl ect a

gradual improvement in market and trading

conditions experienced by the Group in the

previous fi nancial year.

UCS reacted to the diffi cult trading

conditions being experienced by continuing

the process of re-assessing its strategy

and making adjustments that management

believed would set the company on a growth

path that could be sustained through 2011

and beyond.

CONTENTS

GROUP ANNUAL FINANCIAL STATEMENTS


The directors acknowledge responsibility for the preparation of the annual financial statements which, in their opinion, fairly present the results and

cash flows for the financial year and the state of affairs of UCS Group Limited and its subsidiaries at the end of the financial year.

The annual financial statements have been prepared in accordance with International Financial Reporting Standards, in the manner required by

the South African Companies Act (No. 61 of 1973), as amended, and the disclosure requirements of the Listings Requirements of the JSE Limited.

The Group’s independent external auditors, Deloitte and Touche, have audited the annual financial statements and their unmodified report appears

on page 35.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provide

reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements and for maintaining

accountability for assets and liabilities.

The consolidated annual financial statements set out on pages 36 to 99, which have been prepared on the going concern basis, were approved by

the board of directors on 23 November 2010 and were signed on its behalf by:

DF Coles JD Bright

CERTIFICATE OF THE COMPANY SECRETARY

We declare that, to the best of our knowledge, the Company has lodged with the Registrar of Companies all such returns as are required of a public

company in terms of the South African Companies Act (No. 61 of 1973) and that all such returns are true, correct and up-to-date.

Corporate Governance CC

Chartered Secretaries

23 November 2010

DIRECTORS’ RESPONSIBILITY AND APPROVAL


We have audited the Company and Group annual financial statements of UCS Group Limited, which comprise the directors’ report, the statement

of financial position and the consolidated statement of financial position as at 30 September 2010, the income statement and consolidated income

statement, the statement of other comprehensive income and consolidated statement of other comprehensive income, the statement of changes in

equity and the consolidated statement of changes in equity and the statement of cash flows and the consolidated statement of cash flows for the

year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 36 to 99.

DIRECTORS’ RESPONSIBILITY FOR THE ANNUAL FINANCIAL STATEMENTS

The Company’s directors are responsible for the preparation and fair presentation of these annual financial statements in accordance with

International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility includes:

designing, implementing and maintaining internal control relevant to the preparation and fair presentation of annual financial statements that are

free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International

Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures

selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation

of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and

the reasonableness of accounting estimates made by the directors, as well as evaluating the overall financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company and of the Group as

at 30 September 2010 and of their financial performance and their cash flows for the year then ended in accordance with International Financial

Reporting Standards and in the manner required by the Companies Act of South Africa.

DELOITTE & TOUCHE

Registered Auditors

Per BL Escott

Partner

23 November 2010

Deloitte & Touche

Deloitte Place

The Woodlands

20 Woodlands Drive

Woodmead

2199

National Executive: GG Gelink Chief Executive, AE Swiegers Chief Operating Officer, GM Pinnock Audit, DL Kennedy Tax, Legal and Financial

Advisory, L Geeringh Consulting, L Bam Corporate Finance, CR Beukman Finance, TJ Brown Clients & Markets, NT Mtoba Chairman of the Board,

CR Qually Deputy Chairman of the Board.

A full list of partners and directors is available on request.

INDEPENDENT AUDITOR’S REPORT to the members of UCS Group Limited


SHARE INCENTIVE SCHEMES

The Company has three incentive schemes which enable employees

of the Company and its subsidiaries to have the opportunity of

acquiring an interest in the equity of the Company, thereby providing

such employees with further incentive to advance the Group’s interests

and to promote an identity of purpose between the employees and the

shareholders of the Company.

1. The UCS Group Limited Staff Share Trust Share Option

Scheme (Market priced share option scheme)

No new share options were granted under this scheme in the current

year (2009: 800 000). In total, 9 854 075 (2009: 12 046 325)

options were in issue which had not been exercised at the year end.

The terms relating to this Scheme are detailed in note 22 to the

annual financial Statements.

2. UCS Group Limited Staff Share Scheme II (Preference

share scheme)

This scheme was established during October 2000. The terms

relating to this scheme are detailed in note 22 to the annual

financial Statements.

3. Management Incentive Scheme (Zero Cost Incentive Scheme)

890 548 (2009: 364 500) new share options were granted under this

scheme during the year. In total 2 791 869 (2009: 2 462 958)

options were in issue at the year end. The terms relating to this

scheme are detailed in note 22 to the annual financial Statements.

DIVIDENDS

A final dividend of 5 cents (2009: 5 cents) per share in respect

of the year ended 30 September 2009 totalling R14 421 133

(2009: R14 636 955) was declared on 20 November 2009 and paid

on 8 February 2010.

An interim dividend of 4 cents (2009: 4 cents) per share totalling

R11 536 906 (2009: R11 536 906) was declared on 14 May 2010

and paid on 16 August 2010.

SECRETARY



Business address: Postal address:

28th Floor PO Box 31266

209 Smit Street Braamfontein

Braamfontein 2001 2017

DIRECTORATE

The names of the directors of the Company in office at the year end

are set out on page 10. In accordance with the Company’s Articles

of Association Ms V Chetty and Messrs DF Coles, RG Goodman,

NA Michelson retire by rotation, but being eligible, offer themselves for

re-election.

The aggregate interest of the directors in the issued share capital of the

company is set out in note 4.2.

The directors have pleasure in submitting their report together with the

annual financial statements of the Company and of the Group for the

year ended 30 September 2010.

NATURE OF THE BUSINESS

UCS Group Limited is an investment holding company, listed on the

JSE Limited, which has invested in a group of information technology

businesses focused on the provision of software solutions and services

for the retail value chain.

FINANCIAL PERFORMANCE

Group net profit for the year ended 30 September 2010 after allocating

minority shareholders their interest in the Group was R39,642 million

(2009: R27,446 million) supporting headline earnings per ordinary

share of 16,2 cents (2009: 11,4 cents) based on the weighted average

number of shares as set out in note 9 to the annual financial

statements and calculated in accordance with Circular 3/2009 issued

by SAICA in August 2009.

Full details of the financial position and results of the Company and

its subsidiaries are set out in the accompanying annual financial

statements.

SHARE CAPITAL

Ordinary shares

There were no ordinary shares allotted during the year (2009: 2 419 500

at a premium of R0,339 million).

The circumstances of the prior year allotments were as follows:

1. 564 000 ordinary shares – Share options exercised by employees

of the Group in terms of an offer by the staff share trust.

2. 1 855 500 ordinary shares – These shares were allotted pursuant

to the rules of the UCS Group Limited Staff Share Scheme II

whereby a portion of the preference shares convert into ordinary

shares for certain employees as a result of the achievement of

predefined headline earnings per share targets.

Preference shares

In the prior year, 1 855 500 preference shares were converted to

ordinary shares at par and 79 500 preference shares were redeemed

at their issue price of 16,36 cents.

The authorised and issued capital is detailed in note 21 to the financial

statements.

TANGIBLE AND INTANGIBLE ASSETS

Capital expenditure incurred during the year, including the acquisition

of subsidiaries, was made up as follows:

2010

R’000

2009

R’000

Tangible assets (note 10.2) 50 135 73 877

Intangible assets (note 11.2) 104 952 13 786

Goodwill (note 12) 12 004 30 325

167 091 117 988

There have been no major changes in the nature of the above assets

during the period nor any changes in the policy relating to their use.

DIRECTORS’ REPORT


disposed of its entire 92,5% equity interest in UCS Solutions

Incorporated to the management shareholders who held the

remaining 7,5% for a nominal consideration of $1.

2. Effective 30 September 2010, UCS disposed of 30% equity interest

to the management members of UCS Dynamics Software Solutions

(Proprietary) Limited for a consideration of R2,250 million, reducing

the Group’s interest in UCS Dynamics to 70%.

3. Prior to the 2009 financial year end, UCS Solutions Holdings

(Proprietary) Limited concluded a Share Purchase and Repurchase

Agreement with Tactical Software Systems (Proprietary) Limited

and TSS Managed Services (Proprietary) Limited (‘TSSMS’) whereby

UCS Solutions Holdings agreed to dispose of its entire 60%

shareholding in TSSMS by way of the repurchase and the share

sale, in one composite transaction. The total potential transaction

consideration (inclusive of a potential upside capped at a

maximum further R45 million) could be R125 million (excluding

interest and dividends). The transaction was approved by

shareholders at a general meeting held on 3 November 2009

which represented the final suspensive condition to concluding

the transaction.

SUBSIDIARIES

Details of all subsidiaries, are set out on pages 98 and 99 of the annual

financial Statements.

Interest of the holding company in aggregate profits/losses

The holding company’s interest in the aggregate profits after taxation of

the subsidiaries amounted to R109,626 million (2009: R77,777 million)

and losses amounted to R61,165 million (2009: R42,746 million).

SUBSIDIARIES UNDER WARRANTIES

Volume and Affinity Risk Management (Proprietary) Limited

(‘V&A Risk’)

In accordance with the Sale of Shares Agreement entered into with the

vendors of V&A Risk, additional amounts are payable to the vendors of

V&A Risk to the extent the V&A Risk business achieves or exceeds

certain growth profit targets.

MAJOR SHAREHOLDERS

Besides the directors’ holdings (direct and indirect), the directors have

not been informed of any shareholdings other than those detailed,

which are in excess of 5% of the issued share capital of the Company

at 30 September 2010.

Shareholder

Number of

shares

% of

issued capital

Rand Merchant Bank 33 858 006 11,74

Oasis Funds 30 892 569 10,71

Tactial Software Systems

(Proprietary) Limited 27 011 196 9,37

POST STATEMENT OF FINANCIAL POSITION EVENTS

Dividend

The final dividend for the year of 5 cents (2009: 5 cents) per share was

declared on 19 November 2010.

CONTINGENT LIABILITIES

Other than the contingent liabilities disclosed in note 37, the directors

are not aware of any other material contingent liabilities at the time of

approving this report.

ACQUISITIONS

The following acquisitions were concluded by UCS during the period

under review:

1. In respect of the loan facility entered into with wiWallet Mobile

Payments (Proprietary) Limited (‘wiWallet’), UCS exercised its

rights in terms of the option agreement whereby the agreed total

start up facility of R1,76 million was converted into 40% equity

interest in wiWallet, taking its total equity ownership to 50% with

effect from 27 October 2009. In August 2010, UCS acquired a

further 1% for a consideration of R1,2 million resulting in a

51% equity ownership in wiWallet.

2. With effect from 30 November 2009, UCS entered into a Sale of

Shares Agreement whereby it increased its 51% interest in

Lifeworld Group (Proprietary) Limited (‘Lifeworld’) to 100%, for a

nominal consideration. The company subsequently changed its

name to Innervation Value Added Services (Proprietary) Limited.

3. With effect from 1 December 2009, Lifeworld acquired the going

concern business referred to as the Radical Business Unit from

Dynamic Visual Technologies (Gauteng) (Proprietary) Limited for

a total cash consideration of R1,5 million, net of working capital

requirements.

4. On 9 April 2010, UCS entered into a Sale of Shares Agreement for

the acquisition of 51% of the issued share capital of Volume and

Affinity Risk Management (Proprietary) Limited for a purchase

consideration of R1 million, with a further potential upside

payment limited to a maximum of R5 million.

5. Effective 30 April 2010, UCS entered into a Sale of Shares and

Claims Agreement with the Industrial Development Corporation of

South Africa Limited (‘IDC’) to acquire 49% of the issued share

capital of Cquential Solutions (Proprietary) Limited (‘Cquential’)

and all claims which the IDC may have against Cquential for a

purchase consideration of R12 million with a further potential

upside payment limited to a maximum of R10 million. UCS further

entered into a Sale of Shares Agreement with the remaining

shareholders of Cquential being predominantly management, to

acquire a further 7% equity interest in Cquential for a nominal

purchase consideration of R28. In addition, UCS would provide

working capital funding limited to a maximum of R15 million.

6. On 15 March 2010, UCS announced it had formally submitted to

the Argility Limited (‘Argility’) board of directors a notice of its firm

intention to make an offer to the Argility shareholders to acquire

the issued ordinary share capital in Argility held by them by

way of a scheme of arrangement in terms of Section 311 of the

Companies Act No 61 of 1973, as amended (‘Companies Act’).

Following approval by in excess of 90% of the UCS shareholders

who were entitled to vote at the UCS general meeting held on

12 April 2010 and the 100% approval of the scheme by Argility

shareholders present or represented by proxy at the general

meeting held on 11 May 2010, the court granted an order

sanctioning the scheme in terms of Section 311 of the Companies

Act on 18 May 2010. Accordingly with effect from 1 June 2010,

UCS acquired the entire issued share capital of Argility, which

shares were acquired in terms of the scheme, for a cash purchase

consideration of R1,55 per Argility share being R44,2 million in

the aggregate.

DISPOSALS

The following disposals were concluded by UCS in the year under

review:

1. With effect from 31 August 2010, Universal Computer Software

UK (‘UCS UK’), a wholly owned subsidiary of UCS Group Limited,


Group Company

Notes2010

R’000

Restated2009

R’0002010

R’0002009

R’000

CONTINUING OPERATIONS

REVENUE 2 1 321 070 1 232 019 24 629 19 429

PROFIT (LOSS) FROM OPERATIONSbefore finance charges, investment revenues, amortisation,

depreciation, foreign exchange differences, impairments

and research and development expenditure 201 654 170 758 (9 983) (6 950)

Amortisation of intangible assets 3.2 (26 611) (28 295) (290) (289)

Depreciation of property, plant and equipment (including rental equipment) 3.6 (45 211) (40 831) (320) (313)

Foreign exchange differences 3.9 (8 221) (10 605) (5 244) (10 964)

Impairment of intangible assets (including goodwill) 3.10 – (8 027) – –

Impairment of investments in subsidiaries 3.11 – – (45 618) (35 021)

Profit related to the Enterprise Solutions division disposed of in the prior year 12 443 – – –

Profit on disposal of equity interest in subsidiary company 176 – 39 – Research and development expenditure (14 801) (7 278) – –

PROFIT (LOSS) BEFORE FINANCE CHARGESAND INVESTMENT REVENUES 3 119 429 75 722 (61 416) (53 537) Finance charges 5 (13 835) (22 907) (3 133) (4 732) Investment revenues 6 9 165 4 862 41 357 28 160

PROFIT (LOSS) BEFORE TAXATION 114 759 57 677 (23 192) (30 109) Taxation 7 (43 048) (32 216) (1 617) 353

PROFIT (LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS 71 711 25 461 (24 809) (29 756)

DISCONTINUED OPERATIONS

(LOSS) PROFIT FOR THE YEAR FROM DISCONTINUED OPERATIONS 8 (22 104) 15 110 – –

PROFIT (LOSS) FOR THE YEAR 49 607 40 571 (24 809) (29 756)

TOTAL PROFIT ATTRIBUTABLE TO: Owners of the Company 39 642 27 446 Non-controlling interest 9 965 13 125

49 607 40 571

EARNINGS PER SHARE (cents)From continuing and discontinued operations Basic 9 13,9 9,5 Diluted 9 13,7 9,3From continuing operations Basic 9 21,7 6,2 Diluted 9 21,3 6,1

STATEMENTS OF OTHER COMPREHENSIVE INCOME for the year ended 30 September 2010

Group Company

2010R’000

Restated2009

R’0002010

R’0002009

R’000

PROFIT (LOSS) FOR THE YEAR 49 607 40 571 (24 809) (29 756)

OTHER COMPREHENSIVE INCOME FOR THE YEAR AFTER TAXATION: Exchange differences on translating foreign operations 4 881 1 272 – –

TOTAL COMPREHENSIVE INCOME FOR THE YEAR 54 488 41 843 (24 809) (29 756)

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the Company 44 523 28 718 Non-controlling interest 9 965 13 125

54 488 41 843

INCOME STATEMENTS for the year ended 30 September 2010


Group Company

Notes

2010

R’000

2009

R’000

2010

R’000

2009

R’000

ASSETS

Non-current assets

Property, plant and equipment (including rental equipment) 10 86 413 89 775 241 490

Intangible assets 11 156 817 79 479 113 403

Goodwill 12 238 615 237 974 – –

Investments in subsidiaries 13 – – 248 506 228 464

Investments 14 35 000 6 024 65 000 65 930

Loans receivable 15 6 888 3 965 2 252 2 613

Finance lease receivables 16 6 645 3 422 – –

Deferred taxation assets 17 32 936 36 141 5 067 5 067

563 314 456 780 321 179 302 967

Current assets

Inventories 18 47 249 47 660 – –

Trade and other receivables 19 179 463 181 962 9 515 2 239

Finance lease receivables 16 3 998 2 723 – –

Current taxation receivable 7 246 3 203 234 234

Cash and bank balances 131 885 177 764 25 517 42 649

369 841 413 312 35 266 45 122

Assets classified as held for sale 20 – 109 222 – –

Total assets 933 155 979 314 356 445 348 089

EQUITY AND LIABILITIES

Capital and reserves

Issued share capital 21 1 427 1 422 1 442 1 442

Share premium 32 026 30 341 228 228

Treasury share reserve (3 391) (1 928) – –

Equity-settled employee benefit reserve 19 116 18 698 1 556 1 449

Foreign currency translation reserve 6 085 1 204 – –

Change in subsidiary shareholding reserve (3 454) (652) – –

Retained earnings 434 294 420 217 132 507 183 274

Equity attributable to owners of the Company 486 103 469 302 135 733 186 393

Non-controlling interest 27 709 28 337 – –

Total equity 513 812 497 639 135 733 186 393

Non-current liabilities

Borrowings 23 88 227 104 530 13 779 –

Staff share trust 24 – – 2 515 1 875

Deferred taxation liabilities 17 15 356 9 572 – –

Deferred revenue 11 000 22 000 – –

114 583 136 102 16 294 1 875

Current liabilities

Trade and other payables 25 223 676 204 138 10 544 7 541

Provisions 26 6 468 11 604 – –

Borrowings 23 50 670 75 008 3 927 5 886

Loans from subsidiaries 27 – – 189 947 146 394

Current taxation payable 6 390 2 317 – –

Deferred revenue 17 556 17 297 – –

304 760 310 364 204 418 159 821

Liabilities directly associated with assets classified

as held for sale 20 – 35 209 – –

Total equity and liabilities 933 155 979 314 356 445 348 089

STATEMENTS OF FINANCIAL POSITION as at 30 September 2010


Ordinary

share

capital

Preference

share

capital

Share

premium

Treasury

share

reserve

R’000 R’000 R’000 R’000

GROUP

Balance at 1 October 2008 1 448 10 43 255 (1 471)

Profit for the year – – – –

Other comprehensive income for the year – – – –

Total comprehensive income for the year – – – –

Payment of dividends – – – –

Ordinary shares issued at a premium net of share issue costs 3 – 339 –

Ordinary shares repurchased and cancelled (24) – (8 684) –

Preference shares converted to ordinary shares 9 (9) – –

Preference shares repurchased – (1) (13) –

Net increase in treasury shares (14) – (4 556) (457)

Increase in equity-settled employee benefit reserve – – – –

Decrease in non-controlling interest on disposal of subsidiary – – – –

Decrease in non-controlling interest on increase of interest

in subsidiary – – – –

Balance at 30 September 2009 1 422 – 30 341 (1 928)

Profit for the year – – – –

Other comprehensive income for the year – – – –

Total comprehensive income for the year – – – –

Payment of dividends – – – –

Fair value adjustments on treasury shares held – – – 938

Net decrease in treasury shares held 5 – 1 685 (2 401)

Increase in equity-settled employee benefit reserve – – – –

Increase in non-controlling interest on acquisition of interest


Increase in non-controlling interest on decrease of interest

in subsidiaries – – – –

Decrease in non-controlling interest on disposal of subsidiary – – – –

Decrease in non-controlling interest on increase of interest


Balance at 30 September 2010 1 427 – 32 026 (3 391)

STATEMENTS OF CHANGES IN EQUITY for the year ended 30 September 2010


Equity-settled

employee

benefit

reserve

Foreign

currency

translation

reserve

Change in

subsidiary

shareholding

reserve

Retained

earnings

Attributable

to owners of

the Company

Non-

controlling

interest

Total

equity

R’000 R’000 R’000 R’000 R’000 R’000 R’000

17 026 (68) – 418 727 478 927 27 662 506 589

– – – 27 446 27 446 13 125 40 571

– 1 272 – – 1 272 – 1 272

– 1 272 – 27 446 28 718 13 125 41 843

– – – (25 956) (25 956) (3 882) (29 838)

– – – – 342 – 342

– – – – (8 708) – (8 708)

– – – – – – –

– – – – (14) – (14)

– – – – (5 027) – (5 027)

1 672 – – – 1 672 – 1 672

– – – – – (6 392) (6 392)

– – (652) – (652) (2 176) (2 828)

18 698 1 204 (652) 420 217 469 302 28 337 497 639

– – – 39 642 39 642 9 965 49 607

– 4 881 – – 4 881 – 4 881

– 4 881 – 39 642 44 523 9 965 54 488

– – – (25 565) (25 565) (7 598) (33 163)

– – – – 938 – 938

– – – – (711) – (711)

418 – – – 418 – 418

– – – – – 6 404 6 404

– – (984) – (984) 3 234 2 250

– – 652 – 652 (14 506) (13 854)

– – (2 470) – (2 470) 1 873 (597)

19 116 6 085 (3 454) 434 294 486 103 27 709 513 812


Ordinary

share

capital

Preference

share

capital

Share

premium

R’000 R’000 R’000

COMPANY

Balance at 1 October 2008 1 454 10 8 586

Profit for the year – – –

Other comprehensive income for the year – – –

Total comprehensive income for the year – – –

Payment of dividends – – –

Ordinary shares issued at a premium net of share issue costs 3 – 339

Ordinary shares repurchased and cancelled (24) – (8 684)

Preference shares converted into ordinary shares 9 (9) –

Preference shares repurchased – (1) (13)

Increase in equity-settled employee benefit reserve – – –

Balance at 30 September 2009 1 442 – 228

Profit for the year – – –

Other comprehensive income for the year – – –

Total comprehensive income for the year – – –

Payment of dividends – – –

Increase in equity-settled employee benefit reserve

Balance at 30 September 2010 1 442 – 228

STATEMENTS OF CHANGES IN EQUITY for the year ended 30 September 2010 continued


Equity-settled

employee

benefit

reserve

Retained

earnings

Total

equity

R’000 R’000 R’000

1 259 239 204 250 513

– (29 756) (29 756)

– – –

– (29 756) (29 756)

– (26 174) (26 174)

– – 342

– – (8 708)

– – –

– – (14)

190 – 190

1 449 183 274 186 393

– (24 809) (24 809)

– – –

– (24 809) (24 809)

– (25 958) (25 958)

107 – 107

1 556 132 507 135 733


STATEMENTS OF CASH FLOWS for the year ended 30 September 2010

Group Company

Notes

2010

R’000

2009

R’000

2010

R’000

2009

R’000

CASH FLOWS FROM OPERATING ACTIVITIES 142 324 168 118 17 850 6 349

Cash generated from (utilised by) operations

before working capital changes 28 172 425 233 457 (15 052) (18 967)

Working capital changes 29 18 716 8 503 (4 273) 3 377

Cash generated from (utilised by) operations 191 141 241 960 (19 325) (15 590)

Finance charges 5 (12 192) (21 746) (2 565) (4 682)

Investment revenues 6 6 156 6 464 41 357 27 769

Taxation paid 30 (42 781) (58 560) (1 617) (1 148)

CASH FLOWS FROM INVESTING ACTIVITIES (78 173) (66 616) (52 778) 3 923

Acquisition of property, plant and equipment (including

rental equipment) 31 (49 352) (73 392) (73) (175)

Acquisition of intangible assets 32 (23 950) (13 786) – (4)

Acquisition of subsidiaries 33.1 (1 659) (2 605) (53 080) –

Acquisition of subsidiaries 33.2 (43 348) – – –

Acquisition of division (1 500) – – –

Loans repaid (advanced) 2 100 (11 359) – (668)

Proceeds on disposal of property, plant and equipment

(including rental equipment) 11 874 6 592 – –

Proceeds on disposal of intangible assets 52 15 – –

Proceeds on disposal of investment – – 375 –

Proceeds on disposal of a subsidiary net of transaction costs 34 30 841 480 – 4 770

Proceeds on redemption of Darrenfield Investments

(Proprietary) Limited preference shares 65 000 – 65 000 –

Investment in Acacia U2 Investments (Proprietary) Limited

preference shares (65 000) – (65 000) –

Transaction costs capitalised to goodwill – (27) –

Finance lease receivable repaid 5 363 3 528 –

Acquisition of treasury shares – (4 745) – –

Proceeds on disposal of division by a subsidiary company

net of transaction costs – 58 948 – –

Loans advanced to Argility Limited (pre-acquisition) (8 594)

Cash and cash equivalents classified as held for sale 20 – (30 265) – –

CASH FLOWS FROM FINANCING ACTIVITIES (110 030) (66 393) 17 796 27 161

Payments of dividends (33 164) (29 838) (25 958) (26 174)

Proceeds of shares allotted at a premium net of share

issue costs – 342 – 342

Preference shares repurchased – (13) – (13)

Treasury shares utilised for share options exercised 325 – – –

Loans repaid to Quarryfield Investments (Proprietary) Limited (60 000) – (60 000) –

Loans raised from Acacia International Limited, South African

branch 60 000 – 60 000 –

Loans (repaid) raised (77 191) (36 884) 43 754 53 006

Cash and cash equivalents

– Net (decrease) increase (45 879) 35 109 (17 132) 37 433

– At beginning of year 177 764 142 655 42 649 5 216

At end of year 131 885 177 764 25 517 42 649


1 ACCOUNTING POLICIES

1.1 Basis of preparation

The annual financial statements have been prepared in

accordance with International Financial Reporting Standards

(‘IFRS’) and are prepared under the historical cost convention

as modified by the fair value valuation of certain financial

instruments and assets and liabilities acquired in a business

combination in terms of IFRS 3 Business Combinations.

The annual financial statements are prepared using the

accounting policies set out below and are in accordance with

the applicable International Financial Reporting Standards.

The annual financial statements have classified the results of the

operations that have been disposed of, as well as operations that

are held for sale, as discontinued operations. This has resulted

in the income statement presenting the results from these

operations separately as discontinued operations for the current

year as well as the restatement of the prior year comparatives.

The 2009 income statement has been restated to account for

the Group’s disposal of UCS Solutions Inc. under the provisions

of IFRS 5: Non-Current Assets Held for Sale and Discontinued

Operations. The change has not impacted the 30 September

2008 Statement of financial position and has thus not been

re-presented.

At the date of authorisation of these annual financial statements,

the following Standards and Interpretations were in issue but

not yet effective:

IFRS 1 – First-time Adoption of International Financial

Reporting Standards – Limited Exemption from Comparative

IFRS 7 Disclosures for First Time Adopters

IFRS 1 – First-time Adoption of International Financial

Reporting Standards – Amendments resulting from

May 2010 Annual Improvements to IFRS’s

IFRS 2 (AC 139) – Share Based Payments

IFRS 3 (AC 140) – Business Combinations

IFRS 5 (AC 142) – Non-current Assets Held for Sale and

Discontinued Operations

IFRS 7 – Financial Instruments

IFRS 8 (AC 145) – Operating Segments

IFRS 9 – Financial Instruments

IAS 1 (AC 101) – Presentation of Financial Statements

IAS 17 (AC 114) – Leases

IAS 24 – Related Party Disclosures

IAS 27 (AC 132) – Consolidated and Separate Financial

Statements

IAS 32 – Financial Instruments: Presentation

IAS 34 – Interim Financial Reporting

IAS 36 – Impairment of assets

IAS 39 (AC 133) – Financial Instruments: Recognition

and Measurement – Amendments for eligible hedged items

IFRIC 14 – The limit on a defined benefit asset, minimum

funding requirements and their interaction

IFRIC 19 – Extinguising Financial Liabilities with Equity

Instruments

On 22 May 2008, the International Accounting Standards Board

(IASB) issued its latest Standard, titled Improvements to

International Financial Reporting Standards 2008. The Standard

included 35 amendments to various Standards.

The following is a list of standards that have been amended but

are not yet effective.

IFRS 1 (AC 138) – First-time Adoption of International

Financial Reporting Standards

IAS 1 (AC 101) – Presentation of Financial Statements

IAS 16 (AC 123) – Property, Plant and Equipment

IAS 19 (AC 116) – Employee Benefits

IAS 20 (AC 134) – Accounting for Government Grants and

Disclosure of Government Assistance

IAS 27 (AC 132) – Consolidated and Separate Financial

Statements

IAS 28 (AC 110) – Investments in Associates

IAS 29 (AC 124) – Financial Reporting in Hyperinflationary

Economies

IAS 31 (AC 119) – Interests in Joint Ventures

IAS 32 (AC 125) – Financial Instruments: Presentation

IAS 36 (AC 128) – Impairment of Assets

IAS 38 (AC 129) – Intangible Assets

IAS 39 (AC 133) – Financial Instruments: Recognition and

Measurement

IAS 40 (AC 135) – Investment Property

Management have assessed the impact of the newly issued

Standards that are not yet effective. The impact of these

new Standards, together with the amendments to original

Standards are not considered to be material. These new

Standards and amendments to original Standards will be

adopted on their respective effective dates.

1.2 Basis of consolidation

The consolidated annual financial statements incorporate the

annual financial statements of the company and entities controlled

by the company. Control is achieved where the company has the

power to govern the financial and operating policies of an investee

entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the

year are included in the consolidated income statement from

the effective date of acquisition or up to the effective date of

disposal, as appropriate. All intra-group transactions, balances,

income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets (excluding goodwill)

of consolidated subsidiaries are identified separately from the

Group’s equity therein. Non-controlling interests consist of the

amount of those interests at the date of the original business

combination (see below) and the non-controlling’s share of

changes in equity since the date of the combination. Losses

applicable to the non-controlling interest in excess of the non-

controlling’s interest in the subsidiary’s equity are allocated

against the interests of the Group except to the extent that the

non-controlling has a binding obligation and is able to make an

additional investment to cover the losses.

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2010


NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2010 continued

1 ACCOUNTING POLICIES continued

Acquisitions of subsidiaries and businesses are accounted

for using the purchase method. The cost of the business

combination is measured as the aggregate of the fair values (at

the date of exchange) of assets given, liabilities incurred

or assumed, and equity instruments issued by the Group

in exchange for control of the acquiree, plus any costs directly

attributable to the business combination. The acquiree’s

identifiable assets, liabilities and contingent liabilities that

meet the conditions for recognition under IFRS 3 Business

Combinations are recognised at their fair values at the acquisition

date, except for non-current assets (or disposal groups) that are

classified as held for sale in accordance with IFRS 5 Non-

current Assets Held for Sale and Discontinued Operations, which

are recognised and measured at fair value less costs to sell.

1.3 Business combinations

Goodwill arising on acquisition is recognised as an asset and

initially measured at cost, being the excess of the cost of the

business combination over the Group’s interest in the net fair

value of the identifiable assets, liabilities and contingent

liabilities recognised. If, after reassessment, the Group’s interest

in the net fair value of the acquiree’s identifiable assets,

liabilities and contingent liabilities exceeds the cost of the

business combination, the excess is recognised immediately in

profit or loss.

The interest of non-controlling shareholders in the acquiree is

initially measured at the non-controlling shareholder’s proportion

of the net fair value of the assets, liabilities and contingent

liabilities recognised.

1.4 Property, Plant and Equipment

Property, plant and equipment is stated at cost to the Group less

accumulated depreciation and accumulated impairment losses.

Subsequent expenditure is included in the asset’s carrying

amount or recognised as a separate asset, as appropriate, only

when it is probable that future economic benefits associated

with the asset will flow to the Group and the cost of the item can

be measured reliably.

Depreciation is calculated on cost using the straight-line method

over the estimated useful lives of the assets to estimated

residual values, as follows:

Computer equipment 3 years

Improvements to leased premises Remaining period

of the lease

Furniture, fixtures and fittings 6 years

Motor vehicles 5 years

Office equipment 5 years

Rental equipment 3 years

The assets’ residual values, useful lives and depreciation

method are reviewed and adjusted, if appropriate, at each

financial year end. Gains and losses on disposals are determined

by comparing the disposal proceeds with the carrying amount

and are included in the income statement.

1.5 Goodwill

Goodwill arising on the acquisition of a subsidiary or a jointly

controlled entity represents the excess of the cost of acquisition

over the Group’s interest in the net fair value of the identifiable

assets, liabilities and contingent liabilities of the subsidiary or

jointly controlled entity recognised at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is

subsequently measured at cost less any accumulated

impairment losses.

For the purpose of impairment testing, goodwill is allocated to

each of the Group’s cash-generating units expected to benefit

from the synergies of the combination. Cash-generating units to

which goodwill has been allocated are tested for impairment

annually, or more frequently when there is an indication that the

unit may be impaired. If the recoverable amount of the cash-

generating unit is less than the carrying amount of the unit, the

impairment loss is allocated first to reduce the carrying amount

of any goodwill allocated to the unit and then to the other assets

of the unit pro-rata on the basis of the carrying amount of each

asset in the unit. An impairment loss recognised for goodwill is

not reversed in a subsequent period.

On disposal of a subsidiary or a jointly controlled entity, the

attributable amount of goodwill is included in the determination

of the profit or loss on disposal.

1.6 Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are reported at cost less

accumulated amortisation and accumulated impairment losses.

Amortisation is charged on a straight-line basis over the

estimated useful lives. The estimated useful life and amortisation

method are reviewed at the end of each annual reporting period,

with the effect of any changes in estimate being accounted for

on a prospective basis.

Internally generated intangible assets – research and

development expenditure

Expenditure on research activities is recognised as an expense

in the period in which it is incurred.

An internally-generated intangible asset arising from

development (or from the development phase of an internal

project) is recognised if, and only if, all of the following have

been demonstrated:

the technical feasibility of completing the intangible asset so

that it will be available for use or sale;

the intention to complete the intangible asset and use or

sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future

economic benefits;

the availability of adequate technical, financial and other

resources to complete the development and to use or sell the

intangible asset; and

the ability to measure reliably the expenditure attributable to

the intangible asset during its development.

The amount initially recognised for internally-generated

intangible assets is the sum of the expenditure incurred from

the date when the intangible asset first meets the recognition


criteria listed above. Where no internally-generated intangible

asset can be recognised, development expenditure is charged

to profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible

assets are reported at cost less accumulated amortisation and

accumulated impairment losses, on the same basis as intangible

assets acquired separately.

Capitalised development costs that have finite useful lives are

amortised from the date the product is available for use. The

product is amortised on a straight-line basis over the period of

its expected benefit, not exceeding five years, from when the

product is released to the market.

Set-up costs

Costs relating to the establishment and certification of the software

factory are written off over 5 years from date of certification.

Software

Purchased software and the direct costs associated with

the customisation and installation thereof are capitalised.

Expenditure on internally-developed software is capitalised if it

meets the criteria for capitalising development expenditure.

Other software development expenditure is charged to the

income statement when incurred.

The useful life of software is assessed at least annually at the

financial year end and is assessed to have a finite useful life and

is amortised on a straight-line basis over the period of its

expected benefit, not exceeding 6 years.

Intangible assets acquired in a business combination

Intangible assets acquired in a business combination are

identified and recognised separately from goodwill where they

satisfy the definition of an intangible asset and their fair values

can be measured reliably. The cost of such intangible assets is

their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in

a business combination are reported at cost less accumulated

amortisation and accumulated impairment losses, on the same

basis as intangible assets acquired separately.

1.7 Impairment of tangible and intangible assets

excluding goodwill

At each Statement of financial position date, the Group reviews

the carrying amounts of its tangible and intangible assets to

determine whether there is any indication that those assets have

suffered an impairment loss. If any such indication exists,

the recoverable amount of the asset is estimated in order to

determine the extent of the impairment loss (if any). Where it is

not possible to estimate the recoverable amount of an individual

asset, the Group estimates the recoverable amount of the cash-

generating unit to which the asset belongs. Where a reasonable

and consistent basis of allocation can be identified, corporate

assets are also allocated to individual cash-generating units, or

otherwise they are allocated to the smallest group of cash-

generating units for which a reasonable and consistent allocation

basis can be identified.

Intangible assets with indefinite useful lives and intangible

assets not yet available for use are tested for impairment

annually and whenever there is an indication that the asset may

be impaired.

Recoverable amount is the higher of fair value less costs to sell

and value in use. In assessing value in use, the estimated future

cash flows are discounted to their present value using a post-

taxation discount rate that reflects current market assessments

of the time value of money and the risks specific to the asset for

which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit)

is estimated to be less than its carrying amount, the carrying

amount of the asset (cash-generating unit) is reduced to

its recoverable amount. An impairment loss is recognised

immediately in profit or loss, unless the relevant asset is carried

at a revalued amount, in which case the impairment loss is

treated as a revaluation decrease.

1.8 Financial Instruments

Financial instruments include all financial assets, financial

liabilities and equity instruments, including derivative instruments.

Financial assets and financial liabilities, in respect of financial

instruments, are recognised on the Company’s Statement of

financial position when the Company becomes party to the

contractual provisions of the instrument.

Fair value methods and assumptions

The fair value of financial assets and financial liabilities are

determined as follows:

The fair value of financial instruments with standard terms

and conditions and traded in active, liquid and organised

financial markets are determined with reference to the

applicable quoted market prices.

The fair values of derivative instruments are determined using

quoted prices or where such prices are not available,

discounted cash flow methods using the applicable yield

curve for the duration of the instruments for non-optional

derivatives and option pricing models for optional derivatives.

These amounts reflect the approximate values of the net

derivative position at the Statement of financial position date.

The quoted market prices used for interest rate derivatives is

at the effective yield basis, while the quoted market prices

used for foreign exchange derivatives is at the mid or mid

forward rate.

The fair value of financial instruments, excluding derivative

instruments, not traded in active, liquid and organised financial

markets is determined using a variety of methods and

assumptions that are based on market conditions and risks

existing at the Statement of financial position date, including

independent appraisals and discounted cash flow methods.

The fair value of trade and other receivables, cash and cash

equivalents and trade and other payables approximate their

carrying amounts due to the short-term maturities of these items.

Effective interest rate method

The effective interest rate method is a method of calculating the

amortised cost of financial assets and financial liabilities and

of allocating interest income and interest expense over the

relevant period. The effective interest rate is the rate that

discounts estimated future cash receipts and future cash

payments through the expected life of the financial asset and

financial liability, or where appropriate a shorter period, to the

net carrying amount of the financial asset or financial liability.




1.8 Financial instruments continued

Amortised cost

Amortised cost is the amount at which the financial asset and

financial liability is measured at initial recognition less principal

repayments, cumulative amortisation and accumulated

impairment losses. The cumulative amortisation of any

difference between the initial amount and the maturity amount

of the financial asset and financial liability is calculated by using

the effective interest rate method and recognised in profit or

loss as interest income or interest expense over the period of the

investment or debt.

Financial assets

Financial assets are classified into the following categories:

financial assets at fair value through profit or loss, held-to-

maturity investments, available-for-sale financial assets and

loans and receivables. The classification depends on the nature

and purpose of the financial assets and is determined at the

time of initial recognition.

The Group’s principal financial assets are loans and receivables

and cash and cash equivalents.

Trade receivables

Trade and other receivables and other loans are stated at

original investment less principal payments, amortisations and

accumulated impairment losses. Receivables originated by the

Group by providing goods or services directly to the customer

are carried at original invoice amount less provision for doubtful

debts. A provision for doubtful debts is established when there

is objective evidence that the company has incurred a loss and

will not be able to collect all amounts due according to the

original terms of the receivables. The amount of the provision

is the difference between the carrying amount and the

recoverable amount.

The provision for doubtful debts covers losses where there is

objective evidence that the company incurred a loss at the

Statement of financial position date. These incurred loss events

have been estimated based upon historical patterns of losses in

each component, the credit ratings allocated to the customers

and reflecting the current economic climate in which the

borrowers operate. When a receivable is uncollectible, it is

written off to the income statement. Subsequent recoveries are

credited to the income statement.

Cash and cash equivalents

Cash and cash equivalents are measured at fair value based,

where appropriate, at the relevant exchange rate at the

Statement of financial position date. Cash and cash equivalents

comprise cash on hand, demand deposits and other short-term

highly liquid investments that are readily convertible to a known

amount of cash and are subject to an insignificant risk of

changes in value.

Initial recognition and measurement

Financial assets are recognised and derecognised on trade-date,

where the purchase or sale of the financial asset is under a

contract whose terms require delivery of the instrument within

the timeframe established by the market concerned.

All financial assets are initially measured at fair value, including

transaction costs except for those financial assets classified as

at fair value through profit or loss which are initially measured

at fair value, excluding transaction costs.

The fair value of a financial instrument on initial recognition is

normally the transaction price unless the fair value is evident

from observable market data.

Subsequent to initial measurement, these instruments are

measured as set out below:

Loans and receivables and cash equivalents that have fixed

or determinable payments that are not quoted in an active

market are classified as loans and receivables.

Loans and receivables are subsequently measured at amortised

cost using the effective interest rate method less any

impairment loss. Interest income is recognised in profit or loss

by applying the effective interest rate, except for short-term

trade receivables where the recognition of interest would be

immaterial. Trade receivables are carried at original invoice

amount less any impairment loss.

The accounting policy for cash and cash equivalents is dealt

with under cash and cash equivalents set out below.

Financial liabilities

Financial liabilities are classified into the following categories:

financial liabilities at fair value through profit or loss;

financial liabilities held at amortised cost; and

financial guarantee contract liabilities.

The classification depends on the nature and purpose of

the financial liabilities and is determined at the time of

initial recognition.

The Group’s principal financial liabilities are interest bearing

borrowings, provisions, bank borrowings and other short-

term debt.

Interest bearing borrowings

Interest bearing borrowings are originally recognised at fair value,

net of transaction costs incurred. Interest bearing borrowings

are subsequently stated at amortised cost, namely original

borrowings less principal payments and amortisations. Any

differences between proceeds and the redemption value are

recognised in the income statement over the period of the debt

using the effective interest rate method.

Interest bearing borrowings is classified as current liabilities unless

the Group has an unconditional right to defer settlement of the

liability for at least twelve months after the Statement of financial

position date.

Trade and other payables

Trade and other payables are stated at original cost less

principal payments.

Provisions

Provisions are recognised when there is a present, legal or

constructive obligation resulting from past events, for which it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate of the amount of the obligation can be made.


A past event is deemed to give rise to a present obligation if,

taking into account the available evidence, it is more likely than

not that a present obligation exists at the Statement of financial

position date.

The amount recognised as a provision, is the best estimate

of the expenditure required to settle the present obligation at

the Statement of financial position date, taking into account

risks and uncertainties surrounding the provision. Long-term

provisions are discounted to net present value.

Bank borrowings and other short-term debt

The accounting policy for bank borrowings and other short-term

debt is dealt with under cash and cash equivalents.

Initial recognition and measurement

All financial liabilities are initially measured at fair value,

including transaction costs except for those financial liabilities

classified as at fair value through profit or loss, which are initially

measured at fair value, excluding transaction costs.

The fair value of a financial instrument on initial recognition is

normally the transaction price unless the fair value is evident

from observable market data.

Subsequent to initial measurement, these instruments are

measured as set out below:

Interest bearing borrowings, non-interest bearing borrowings,

bank borrowings and other short-term debt are subsequently

measured at amortised cost using the effective interest rate

method. Interest expense is recognised in profit or loss by

applying the Statement of financial position rate.

Interest bearing borrowings and non-interest bearing

borrowings are classified as current liabilities unless there

is an unconditional right to defer settlement of the liability

for at least twelve months after the Statement of financial

position date.

Trade and other payables are carried at original invoice amount.

Dividends payable are stated at amounts declared.

A contract that contains an obligation to purchase its own equity

instrument for cash or another financial asset gives rise to a

financial liability and is accounted for at the present value of

the redemption amount. On initial recognition its fair value is

reclassified directly from equity. Subsequent changes in the

liability are included in profit and loss. On expiry or exercise of

the option the carrying value of the liability is reclassified directly

to equity.

Equity instruments

An equity instrument is any contract that evidences a residual

interest in the assets of the company after deducting all of its

liabilities. The Group’s principal equity instrument is stated

capital, which is recorded at proceeds received, net of any

direct issue costs.

De-recognition

Financial assets (or a portion thereof) are de-recognised when

the rights to the cash flows expire or when the Group transfers

substantially all the risks and rewards related to the financial

asset or when the entity loses control of the financial asset. On

de-recognition, the difference between the carrying amount of

the financial asset and proceeds receivable and any prior

adjustment to reflect fair value that had been reported in equity

is included in the income statement.

Financial liabilities (or a portion thereof) are de-recognised

when the obligation specified in the contract is discharged,

cancelled or expired. On de-recognition, the difference between

the carrying amount of the financial liability, including related

non-amortised costs and amounts paid for it is included in profit

or loss.

Offset

Where a legally enforceable right of offset exists for recognised

financial assets and financial liabilities and there is an intention

to settle the liability and realise the asset simultaneously, or to

settle on a net basis, all related financial effects are offset.

1.9 Inventories

Inventories are measured at the lower of cost and net realisable

value. Net realisable value is the estimated selling price in

the ordinary course of business less the estimated costs of

completion and the estimated costs necessary to make the sale.

The cost of inventories comprises of all costs of purchase, costs

of conversion and other costs incurred in bringing the inventories

to their present location and condition. The cost of work-in-

progress comprises direct labour, other direct costs and related

production overheads. Cost is calculated either using the first-in

first-out method or the weighted average method.

When inventories are sold, the carrying amount of those

inventories is recognised as an expense in the period in which

the related revenue is recognised. The amount of any write-

down of inventories to net realisable value and all losses of

inventories are recognised as an expense in the period the

write-down or loss occurs. The amount of any reversal of any

write-down of inventories, arising from an increase in net

realisable value, is recognised as a reduction in the amount of

inventories recognised as an expense in the period in which the

reversal occurs.

1.10 Leasing

Leases are classified as finance leases whenever the terms

of the lease transfer substantially all the risks and rewards

of ownership to the lessee. All other leases are classified as

operating leases.

The Group as lessor

Amounts due from lessees under finance leases are recorded

as receivables at the amount of the Group’s net investment in

the leases. Finance lease income is allocated to accounting

periods so as to reflect a constant periodic rate of return on the

Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognised on a straight-

line basis over the term of the relevant lease. Initial direct 1



1.10 Leasing continued

costs incurred in negotiating and arranging an operating lease

are added to the carrying amount of the leased asset and

recognised on a straight-line basis over the lease term.

The Group as lessee

Assets held under finance leases are initially recognised as

assets of the Group at their fair value at the inception of the

lease or, if lower, at the present value of the minimum lease

payments. The corresponding liability to the lessor is included

in the Statement of financial position as a finance lease

obligation. Lease payments are apportioned between finance

charges and reduction of the lease obligation so as to achieve a

constant rate of interest on the remaining balance of the liability.

Finance charges are charged directly to profit or loss, unless

they are directly attributable to qualifying assets, in which case

they are capitalised in accordance with the Group’s general

policy on borrowing costs. Contingent rentals are recognised as

expenses in the periods in which they are incurred.

Operating lease payments are recognised as an expense on a

straight-line basis over the lease term, except where another

systematic basis is more representative of the time pattern in

which economic benefits from the leased asset are consumed.

Contingent rentals arising under operating leases are recognised

as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into

operating leases, such incentives are recognised as a liability.

The aggregate benefit of incentives is recognised as a reduction

of rental expense on a straight-line basis, except where another

systematic basis is more representative of the time pattern in

which economic benefits from the leased asset are consumed.

1.11 Taxation

Income taxation expense represents the sum of the taxation

currently payable and deferred taxation.

Current taxation

Current taxation for current and prior periods is, to the extent

unpaid, recognised as a liability. If the amount already paid in

respect of current and prior periods exceeds the amount due for

those periods, the excess is recognised as an asset.

Deferred taxation

Deferred taxation is provided for using the balance sheet liability

method, on all temporary differences between the carrying

values of assets and liabilities for accounting purposes and the

amounts used for taxation purposes. The provision for deferred

taxation is calculated using enacted or substantively enacted

taxation rates at the Statement of financial position date that are

expected to apply when the asset is realised or liability settled.

A deferred taxation asset is recognised to the extent that it is

probable that future taxable profits will be available against

which the deferred taxation asset can be realised.

Deferred taxation liabilities are recognised for all taxable

temporary differences arising on investments in subsidiaries,

associates and interests in joint ventures, except where the

Group is able to control the reversal of the temporary difference

and it is probable that the temporary difference will not reverse

in the foreseeable future.

The carrying amount of deferred taxation assets is reviewed at

each Statement of financial position date and is reduced to the

extent that it is no longer probable that sufficient taxable profits

will be available to allow all or part of the asset to be recovered.

The provision for deferred taxation assets and liabilities reflects

the taxation consequences that would follow from the expected

recovery or settlement of the carrying amount of its assets and

liabilities. Such assets and liabilities are not recognised if the

temporary difference arises from:

non-taxation deductible goodwill;

the initial recognition (other than in a business combination)

of an asset or liability to the extent that neither accounting nor

taxable profit is affected on acquisition.

Deferred taxation assets and liabilities are offset when there is a

legally enforceable right to set-off current taxation assets against

current taxation liabilities and they relate to income taxes levied

by the same taxation authority and the Group intends to settle

its current taxation assets and liabilities on a net basis.

Secondary Tax on Companies (‘STC’)

STC is recognised as part of the current taxation charge in the

income statement when the related dividend is declared.

1.12 Foreign currencies

Items included in the annual financial statements of the Group’s

entities are measured using the currency of the primary

economic environment in which the entity operates (‘the

functional currency’). The consolidated annual financial

statements are presented in Rands, which is the Company’s

functional and presentation currency.

A foreign currency transaction is recorded, on initial recognition

in Rand, by applying to the foreign currency amount, the spot

exchange rate between the functional currency and the foreign

currency at the date of the transaction.

At each Statement of financial position date:

foreign currency monetary items are translated using the

closing rate;

non-monetary items that are measured in terms of historical

cost in a foreign currency are translated using the exchange

rate at the date of the transaction; and

non-monetary items that are measured at fair value in a

foreign currency are translated using the exchange rates at

the date when the fair value was determined.

Foreign exchange gains and losses resulting from the translation

and settlement of monetary assets and liabilities are charged to

the income statement except for exchange differences arising

on non-monetary items where the changes in fair values are

recognised directly in equity.

Foreign subsidiaries

The results and financial position of a foreign operation (none

of which has the currency of a hyperinflationary economy) are



translated into the functional currency using the following

procedures:

assets and liabilities are translated at the closing rate at the

date of that Statement of financial position;

income and expenses are translated at the average exchange

rates for the period unless exchange rates fluctuate

significantly; and

all resulting exchange differences are classified as equity and

transferred to the Group’s translation reserve. Such translation

differences are recognised as income or expense in the

period in which the operation is disposed of.

Goodwill and fair value adjustments arising on the acquisition of

a foreign operation are treated as assets and liabilities of the

foreign operation and translated at the closing rate.

1.13 Employee benefits

Short-term employee benefits

Remuneration to employees is charged to the income statement.

Provision is made for accumulated leave, incentive bonuses

and other short-term employee benefits.

Retirement benefits

Payments to defined contribution retirement benefit plans are

charged as an expense as they fall due.

1.14 Revenue recognition

Revenue is measured at the fair value of the consideration

received or receivable and represents amounts receivable for

goods and services provided in the normal course of business,

net of discounts and sales related taxes.

Revenue is recognised when the following criteria are met:

Revenue from the sale of products

Revenue from the sale of products is recognised when

significant risks and rewards have passed.

Revenue arising from the rendering of services

Revenue arising from the rendering of services, which includes

computer processing services, software development charges,

licence fees, installation and maintenance charges and training,

is recognised on the accrual basis in accordance with the

substance of the agreement.

Revenue from fixed price contracts for software development is

recognised using the percentage-of-completion (‘POC’) method.

Under the POC method, revenue is generally recognised based

on the services performed to date as a percentage of the total

services to be performed.

If circumstances arise that may change the original estimates

of revenues, costs or extent of progress toward completion,

estimates are revised. These estimates may result in increases

or decreases in estimated revenues or costs and are reflected in

income in the period in which the circumstances that give rise

to the revision become known to management.

Finance income

Interest is recognised when it accrues to the Group on a time

proportion basis, taking account of the principal outstanding

and the effective yield of the asset.

Investment income

Cash dividends and the full cash equivalent of capitalisation

share awards received, where applicable, are recognised when

the right to receive payment or transfer is established.

1.15 Provisions

Provisions are recognised when the Group has a present

obligation (legal or constructive) as a result of a past event, it is

probable that the Group will be required to settle the obligation

and a reliable estimate can be made of the amount of the

obligation.

The amount recognised as a provision is the best estimate of the

consideration required to settle the present obligation at the

Statement of financial position date, taking into account the

risks and uncertainties surrounding the obligation. Where a

provision is measured using the cash flows estimated to settle

the present obligation, its carrying amount is the present value

of those cash flows.

When some or all of the economic benefits required to settle

a provision are expected to be recovered from a third party,

the receivable is recognised as an asset if it is virtually certain

that reimbursement will be received and the amount of the

receivable can be measured reliably.

Onerous contracts

Present obligations arising under onerous contracts are

recognised and measured as a provision. An onerous contract

is considered to exist where the Group has a contract under

which the unavoidable costs of meeting the obligations under

the contract exceed the economic benefits expected to be

received under it.

Restructurings

A restructuring provision is recognised when the Group has

developed a detailed formal plan for the restructuring and has

raised a valid expectation in those affected that it will carry out

the restructuring by starting to implement the plan or announcing

its main features to those affected by it. The measurement of a

restructuring provision includes only the direct expenditures

arising from the restructuring, which are those amounts that are

both necessarily entailed by the restructuring and not associated

with the ongoing activities of the entity.

Warranties

Provisions for warranty costs are recognised at the date of sale

of the relevant products, at the directors’ best estimate of the

expenditure required to settle the Group’s obligation.

1.16 Segmental information

The principal segments of the Group have been identified on

a primary basis by the nature of operations into three major

areas namely:

1. Retail Solutions

2. Software

3. Investments


For cash-settled employee benefit payments, a liability equal to

the portion of the goods or services received is recognised at the

current fair value determined at each Statement of financial

position date.

1.18 Assets classified as held for sale

Non-current assets and disposal groups are classified as held

for sale if their carrying amount will be recovered through a sale

transaction rather than through continuing use. This condition

is regarded as met only when the sale is highly probable and the

asset (or disposal group) is available for immediate sale in its

present condition. Management must be committed to the

sale which should be expected to qualify for recognition as a

completed sale within one year from the date of classification.

When the Group is committed to a disposal plan involving loss of

control of a subsidiary, or is committed to disposal of a division, all

the assets and liabilities relating to that subsidiary or division are

classified as held for sale if the criteria described above are met.

This policy is applied regardless of whether the Group will retain a

non-controlling interest in its former subsidiary after the disposal.

Non-current assets and disposal groups classified as held for

sale are measured at the lower of carrying amount and fair value

less costs to sell.

1.19 Comparative figures

When an accounting policy is altered comparative figures are

restated, if required, by the applicable accounting statement

and where material. Details of these restatements have been

included in the relevant notes to the annual financial statements.

Comparative figures have been restated in the income

statement and segment report as a result of the classification

of discontinued operations.


1.16 Segmental information continued

All segment revenue and expenses are directly attributable to

the segments. Segment assets include all operating assets used

by a segment. Segment liabilities include all operating liabilities.

These assets and liabilities are all directly attributable to

the segments.

1.17 Equity-settled Employee benefits

Equity-settled employee benefit payments to employees and

others providing similar services are measured at the fair

value of the equity instrument at the grant date. Fair value

is measured by using a binomial model. The expected life

used in the model has been adjusted, based on management’s

best estimate, for the effects of non-transferability, exercise

restrictions and behavioural considerations. Further details on

how the fair value of equity-settled employee benefit transactions

has been determined can be found in note 23.

The fair value determined at the grant date of the equity-settled

employee benefit payments is expensed on a straight-line basis

over the vesting period, based on the Group’s estimate of shares

that will eventually vest.

The above policy is applied to all equity-settled employee benefit

payments that were granted after 7 November 2002 that vested

after 1 January 2005. No amount has been recognised in the

annual financial statements in respect of the other equity-

settled employee benefit payments.

Equity-settled employee benefit payment transactions with other

parties are measured at the fair value of the goods and services

received, except where the fair value cannot be estimated

reliably, in which case they are measured at the fair value of the

equity instruments granted, measured at the date the entity

obtains the goods or the counterparty renders the service.



Group Company

2010

R’000

Restated

2009

R’000

2010

R’000

2009

R’000

2 REVENUE

2.1 Revenue comprises sales of hardware, software, processing services,

implementation and support services, development charges, licence

fees, installation and maintenance charges, training charges and

commission received, exclusive of Value Added Taxation.

2.2 A summarised analysis of the Group’s revenue for the year from

continuing operations is as follows:

Turnover

Own software revenue 160 263 118 085 – –

OEM third party product revenue 341 132 301 402 – –

Services and other 819 163 810 032 – –

1 320 558 1 229 519 – –

Administration fees 512 2 500 24 629 19 429

1 321 070 1 232 019 24 629 19 429

Revenue classified as discontinued operations (note 8) 19 305 266 768 – –

1 340 375 1 498 787 24 629 19 429

3 PROFIT (LOSS) BEFORE FINANCE CHARGES

AND INVESTMENT REVENUES

is stated after taking into account the following items:

After crediting

3.1 Gain on disposal of property, plant and equipment

(including rental equipment) 546 579 – –

After charging

3.2 Amortisation of intangible assets:

Brands 348 348 – –

Computer software 17 815 13 227 290 289

Customer relationships 6 083 8 554 – –

Development costs 2 697 1 728 – –

Intellectual property 101 123 – –

Set-up costs (1 445) 2 309 – –

Trademarks 1 012 2 006 – –

26 611 28 295 290 289

3.3 Auditors’ remuneration:

Current year fee 4 025 3 341 465 450

Other services 155 925 1 124

4 180 4 266 466 574

3.4 Consulting fees 27 794 21 971 1 106 1 559

3.5 Cost of sales 241 491 231 562 – –

3.6 Depreciation of property, plant and equipment

(including rental equipment)

Owned

Computer equipment 13 253 13 250 228 240

Furniture, fixtures and fittings 2 227 2 130 16 12

Improvements to leased premises 2 678 2 695 49 35

Motor vehicles 849 965 – –

Office equipment 2 389 1 466 27 26

Rental equipment 13 072 9 030 – –

34 468 29 536 320 313

Leased

Computer equipment 10 108 10 924 – –

Motor vehicles 635 371 – –

45 211 40 831 320 313


Group Company

2010

R’000

Restated

2009

R’000

2010

R’000

2009

R’000

3 PROFIT (LOSS) BEFORE FINANCE CHARGES

AND INVESTMENT REVENUES

is stated after taking into account the following items:

3.7 Employee costs 673 761 610 303 22 477 16 623

3.8 Equity-settled employee benefit expense 2 656 3 910 623 530

3.9 Foreign exchange differences

Unrealised 6 479 10 476 5 244 10 964

Realised 1 742 129 – –

8 221 10 605 5 244 10 964

3.10 Impairment of intangible assets (including goodwill)

Impairment of goodwill – 6 179 – –

Impairment of intangible assets – 1 848 – –

– 8 027 – –

3.11 Impairment of investments in subsidiaries – – 45 618 35 021

3.12 Loss on disposal of property, plant and equipment

(including rental equipment) 166 – – –

3.13 Operating expenditure excluding cost of sales and employee costs 229 622 196 204 17 418 21 087

3.14 Operating lease charges

Premises 38 095 32 135 360 298

Office equipment 1 552 1 262 – –

Motor vehicles 1 125 922 – –

40 772 34 319 360 298

3.15 Transaction costs

Costs relating to the Group’s corporate activity have been expensed

in accordance with the revised IFRS 3 requirements applicable in

the current year. Transaction costs were capitalised to the cost of

the investments in the prior year. 1 655 – 1 655 –

3.16 Number of employees 2 315 2 677* 13 14

* Includes prior year disposal group of TSS Managed Services (Proprietary) Limited, 398.



Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

4 DIRECTORS’ REMUNERATION AND INTERESTS

4.1 Directors’ remuneration

The directors’ remuneration for the year ended 30 September 2010

was as follows:

Non-executive directors

Services as directors 964 899 964 899

Executive directors

Salaries, bonuses and medical aid 9 218 6 556 9 218 6 556

Allowances 311 269 311 269

Pension 591 527 591 527

10 120 7 352 10 120 7 352

Total directors’ remuneration 11 084 8 251 11 084 8 251

Salary

R’000

Incentive

bonus

R’000

Long-term

incentive

bonus

R’000

Allowances

R’000

Pension

R’000

Total

2010

R’000

Total

2009

R’000

Executive directors – 2010

JD Bright 1 433 403 – – 127 1 963 1 582

DF Coles 748 396 – 111 97 1 352 1 557

JP Fortuin 998 229 350 18 67 1 662 500

NA Michelson 1 778 371 350 91 171 2 761 2 050

DC Sparrow 1 469 342 350 91 130 2 382 1 663

6 426 1 741 1 050 311 592 10 120 7 352

Salary

R’000

Incentive

bonus

R’000

Long-term

incentive

bonus

R’000

Allowances

R’000

Pension

R’000

Total

2009

R’000

Total

2008

R’000

Executive directors – 2009

JD Bright 1 362 100 – – 120 1 582 1 667

DF Coles 986 383 – 92 96 1 557 1 287

JP Fortuin* 461 – – 9 30 500 –

NA Michelson 1 711 100 – 78 161 2 050 2 341

DC Sparrow 1 353 100 – 90 120 1 663 1 667

5 873 683 – 269 527 7 352 6 962

* Ms Fortuin was appointed as an executive director effective from 31 March 2009. Accordingly, Ms Fortuin’s remuneration has been included as from 1 April 2009.

Group

2010

R’000

2009

R’000

Non-executive directors – Fees

V Chetty 120 86

JR Claassen 112 101

RG Goodman 176 188

BP Hattingh 112 101

MPR Morojele 242 230

P Terblanche 202 193

964 899


4 DIRECTORS’ REMUNERATION AND INTERESTS continued

4.2 Directors’ interest in share capital

4.2.1 The aggregate interests of the directors in the issued ordinary share capital of the Company are:

Number of shares (’000)

2010

Number of shares (’000)

2009

Direct Indirect Total Direct Indirect Total

Non-executive directors

V Chetty 59 – 59 59 – 59

JR Claassen 50 – 50 50 – 50

RG Goodman 80 – 80 80 – 80

BP Hattingh – 75 75 – 75 75

189 75 264 189 75 264

Executive directors

JD Bright 6 991 38 960 45 951 6 537 46 426 52 963

DF Coles 4 945 29 770 34 715 4 945 29 770 34 715

JP Fortuin 103 900 1 003 80 – 80

NA Michelson – 5 184 5 184 – 4 684 4 684

DC Sparrow 500 3 176 3 676 500 1 676 2 176

12 539 77 990 90 529 12 062 82 556 94 618

Total 12 728 78 065 90 793 12 251 82 631 94 882

4.2.2 Future entitlements under share option schemes are:

Grant date

of options

Strike price

(cents)

Total

2010

’000

Total

2009

’000

2010

Market priced options

JR Claassen 27-Feb-04 109 50 50

RG Goodman 27-Feb-04 109 25 25

BP Hattingh 27-Feb-04 109 25 25

P Terblanche 27-Feb-04 109 100 100

JP Fortuin 18-Nov-05 134 200 200

MPR Morojele 18-Nov-05 134 100 100

V Chetty 31-Aug-07 451 100 100

600 600

Zero cost options

JP Fortuin 28-Aug-08 – 69 83

JP Fortuin 21-Nov-08 – 124 124

193 207

793 807

The market priced options are exercisable in tranches of 25% per anum commencing on the anniversary of the grant date. Options are

cumulative in respect of options not taken up to any anniversary and may be exercised at any time, up to the 10th anniversary of the grant

date, at which time, any options not exercised will lapse.

The zero cost option incentive shares are exercisable within 90 days of the respective vesting dates, after which time, the option lapses.

The share options vest at staggered intervals into ordinary shares over a period of 5 years from the date of issue in tranches of 10%, 15%,

20%, 25% and 30%.

4.3 Directors’ interest in contracts

The directors have declared at the approval date of this report that they are not materially interested in any transaction of significance with

the Company or any of its subsidiaries.



Group Company

2010

R’000

Restated

2009

R’000

2010

R’000

2009

R’000

5 FINANCE CHARGESInterest on bank overdrafts, loans and finance lease obligations 13 835 22 907 765 1 298

Interest on Group company loans – – 2 368 3 434

Total finance charges 13 835 22 907 3 133 4 732

External finance charges classified as discontinued operations (note 8) – 841 – –

Less: Non-cash finance charges 1 643 2 002 568 50

Finance charges for statements of cash flows 12 192 21 746 2 565 4 682

Group Company

2010

R’000

Restated

2009

R’000

2010

R’000

2009

R’000

6 INVESTMENT REVENUESInterest from bank deposits and loans receivable 6 156 4 862 1 186 487

Interest from Group company loans – – 6 586 6 375

Dividends received from unlisted equity investment

– subsidiaries – – 26 226 12 598

– other* 3 009 – 7 359 8 700

Total investment revenues 9 165 4 862 41 357 28 160

External investment revenues classified as discontinued operations

(note 8) – 1 993 – –

Less: Non-cash investment revenues 3 009 391 – 391

Investment revenues for statements of cash flows 6 156 6 464 41 357 27 769

* Preference share receipts of R4,4 million (2009: R8,7 million) have been applied to the Group interest expense related to loans, with a set-off entitlement, as detailed in note 14 to the financial statements.

Group Company

2010

R’000

Restated

2009

R’000

2010

R’000

2009

R’000

7 TAXATION

7.1 Normal taxation

Current year taxation

– Current 39 421 30 359 – –

– Deferred 1 562 (3 679) – (1 501)

Prior year (over) under provision

– Current (1 412) 127 – –

– Deferred (1 325) 2 579 – –

Secondary Taxation on Companies 4 285 2 030 1 617 1 148

Withholding taxation 517 800 – –

43 048 32 216 1 617 (353)

Taxation classified as discontinued operations (note 8) – 17 065 – –

Current taxation – 8 448 – –

Deferred taxation – 8 617 – –

43 048 49 281 1 617 (353)


Group Company

2010

%

Restated

2009

%

2010

%

2009

%

7 TAXATION continued

7.2 Reconciliation of the rate of taxation

Normal rate of taxation 28,0 28,0 28,0 28,0

Adjusted for:

Capital gains taxation 5,0 – – –

Deferred taxation not raised on current year estimated taxation loss

(local and foreign) 6,5 6,0 2,8 –

Exempt income and disallowable expenses (10,2) 8,7 (30,8) (23,0)

Foreign taxation rate differences 0,2 1,1 – –

Prior period under provision 0,2 0,2 – –

Reversal of deferred taxation on prior year assessed loss 2,5 1,7 – –

Secondary Taxation on Companies 3,7 3,5 7,0 (3,8)

Utilisation of assessed losses and/or raising of assessed losses

previously not recognised 1,1 5,3 – –

Withholding taxation 0,5 1,4 – –

Effective rate of taxation 37,5 55,9 7,0 1,2

Group

2010

R’000

2009

R’000

7.3 Estimated taxation losses in subsidiaries available for set off against future taxable income 144 692 62 485

Taxation losses on which deferred taxation assets have been raised 41 638 46 913

103 054 15 572

Deferred taxation assets have not been raised on estimated taxation losses to the extent that management have assessed that the estimated

taxation losses will not be utilised in the foreseeable future. Accordingly, deferred taxation assets of R 28,9 million (2009: R4,4 million) have

not been raised at the year end.

8 DISCONTINUED OPERATION

8.1 Disposal of UCS Solutions Incorporated

With effect from 31 August 2010, Universal Computer Software UK (‘UCS UK’), a wholly owned subsidiary of UCS Group Limited, disposed

of its entire 92,5% equity interest in UCS Solutions Incorporated to the management shareholders, who held the remaining 7,5%, for a

nominal consideration of $1.

The disposal followed a UCS Group decision to reposition its interest in the US market through a channel partner relationship versus a

direct interest.



8 DISCONTINUED OPERATION continued

8.2 Analysis of profit for the year from discontinued operation

The results of the discontinued operation included in the statement of comprehensive income are set out below. The comparative profit and

cash flows from discontinued operation have been restated to include those operations classified as discontinued in the current period.

Group

2010

R’000

Restated

2009

R’000

REVENUE 19 305 266 768

(LOSS) PROFIT FROM OPERATIONSbefore finance charges, investment revenues, amortisation,

depreciation, foreign exchange differences, impairments

and research and development expenditure (4 516) 60 005

Amortisation of intangible assets – 10 142

Depreciation of property, plant and equipment (including rental equipment) 82 3 066

Foreign exchange differences (183) –

Impairment of intangible assets (including goodwill) 10 402 15 774

Impairment of loan owing to Universal Computer Software UK Limited 20 575 –

Profit on disposal of subsidiary 13 108 –

(LOSS) PROFIT BEFORE FINANCE CHARGES AND INVESTMENT REVENUES (22 284) 31 023

Finance charges – (841)

Investment revenues 180 1 993

(LOSS) PROFIT BEFORE TAXATION (22 104) 32 175

Taxation – (17 065)

(LOSS) PROFIT FOR THE YEAR FROM DISCONTINUED OPERATION (22 104) 15 110

(Loss) profit for the year from discontinued operation includes the following directly related

to the disposal:

Impairment loss (30 977) (15 774)

Profit (loss) on disposal of subsidiary 13 108 (4 559)

Profit on sale of division by a subsidiary company – 33 263

(Loss) profit before taxation (17 869) 12 930

Taxation – (11 499)

(Loss) profit directly related to disposals (17 869) 1 431

Cash flows from discontinued operation

Net cash flows from operating activities (5 493) 7 816

Net cash flows from investing activities (43) (9 211)

Net cash flows from financing activities 6 954 16 247

Net cash flows 1 418 14 852

9 EARNINGS PER SHARE Earnings per share is based on earnings attributable to equity holders of the Company

and the weighted average number of shares in issue during the year.

Basic and headline earnings

Profit for the year attributable to owners of the Company 39 642 27 446

Comprising:

Basic earnings – continuing operations 61 746 17 914

Basic earnings – discontinued operation (22 104) 9 532

9.1 Basic earnings per share (cents)

Weighted average number of ordinary shares for the purposes of basic earnings per share (’000) 284 653 290 147

Basic earnings per share – continuing operations 21,7 6,2

Basic earnings per share – discontinued operation (7,8) 3,3

Total basic earnings per share 13,9 9,5


Group

2010

R’000

Restated

2009

R’000

9 EARNINGS PER SHARE continued

9.2 Diluted earnings per share (cents)

The weighted average number of ordinary shares for the purposes of diluted earnings per share

reconciles to the weighted average number of ordinary shares used in the calculation of basic

earnings per share as follows:

Weighted average number of ordinary shares used in the calculation of basic earnings per share

(’000) 284 653 290 147

Shares deemed to be issued for no consideration in respect of:

– Employee share options (’000) 5 078 5 570

Diluted weighted average number of shares in issue (’000) 289 731 295 717

Diluted earnings per share – continuing operations 21,3 6,1

Diluted earnings per share – discontinued operation (7,6) 3,2

Total diluted earnings per share 13,7 9,3

9.3 Headline earnings per share (cents)

Reconciliation of basic earnings to headline earnings

Basic earnings 39 642 27 446

Adjusted for (net of taxation and non-controlling interest):

– impairment of goodwill – 6 179

– impairment classified as discontinued operation 10 402 19 649

– impairment of intangible assets – 1 330

– profit on disposal of division by a subsidiary company (10 701) (26 007)

– loss on disposal of subsidiary 7 155 4 930

– profit on disposal of property, plant and equipment (including rental equipment) (249) (384)

Basic headline earnings 46 249 33 143

Reconciliation of basic earnings to headline earnings – continuing operations

Basic earnings 61 746 17 914


– impairment of goodwill – 6 179

– impairment of intangible assets – 1 330

– profit on disposal of division by a subsidiary company (10 701) –

– profit on disposal of subsidiary (312) –

– profit on disposal of property, plant and equipment (including rental equipment) (249) (384)

Basic headline earnings – continuing operations 50 484 25 039

Reconciliation of basic earnings to headline earnings – discontinued operations

Basic earnings (22 104) 9 532


– impairment classified as discontinued operations 10 402 19 649

– profit on disposal of division by a subsidiary company – (26 007)

– loss on disposal of subsidiary 7 467 4 930

Basic headline earnings – discontinued operations (4 235) 8 104

Weighted average number of ordinary shares for the purposes of headline earnings per share (’000) 284 653 290 147

Basic headline earnings per share – continuing operations 17,7 8,6

Basic headline earnings per share – discontinued operation (1,5) 2,8

Total basic headline earnings per share 16,2 11,4

9.4 Diluted headline earnings per share (cents)

Diluted weighted average number of ordinary shares for the purposes of diluted headline earnings

per share (’000) 289 731 295 717

Diluted headline earnings per share – continuing operations 17,4 8,5

Diluted headline earnings per share – discontinued operation (1,4) 2,7

Total diluted headline earnings per share 16,0 11,2

9.5 Actual number of ordinary shares in issue at the year end (’000) 285 356 284 391



Cost

R’000

Accumulated

depreciation

R’000

Carrying

value

R’000

10 PROPERTY, PLANT AND EQUIPMENT (INCLUDING RENTAL EQUIPMENT)

10.1 Group – 2010

Owned




Motor vehicles 3 887 2 666 1 221


Rental equipment 69 434 40 526 28 908

Total owned 243 915 173 387 70 528

Leased



Total leased 40 502 24 617 15 885

284 417 198 004 86 413

Group – 2009

Owned






Rental equipment 50 386 28 696 21 690

Total owned 215 255 147 516 67 739

Leased



Total leased 43 045 21 009 22 036

258 300 168 525 89 775

Company – 2010

Owned

Computer equipment 798 713 85

Furniture, fixtures and fittings 70 33 37

Improvements to leased premises 193 118 75

Office equipment 172 128 44

1 233 992 241

Company – 2009

Owned

Computer equipment 753 463 290

Furniture, fixtures and fittings 61 17 44

Improvements to leased premises 194 70 124

Office equipment 133 101 32

1 141 651 490


10 PROPERTY, PLANT AND EQUIPMENT (INCLUDING RENTAL EQUIPMENT) continued

10.2 Movement summaryCarrying

value

beginning

of year

Acquisition

through

business

combinations

Disposal

through

sale of

subsidiary

Transfers

and

re-allocations

R’000 R’000 R’000 R’000

Group – 2010

Owned

Computer equipment 28 582 353 (154) (293)

Furniture, fixtures and fittings 6 887 225 (85) –

Improvements to leased premises 7 430 – – (245)

Motor vehicles 1 648 – – 39

Office equipment 1 502 12 – 538

Rental equipment 21 690 – – –

Total owned 67 739 590 (239) 39

Leased

Computer equipment 19 675 193 – –

Motor vehicles 2 361 – – (39)

Total leased 22 036 193 – (39)

89 775 783 (239) –

Leased motor vehicles and computer equipment with a net book value of R10,7 million (2009: R22,0 million) are encumbered as detailed

in note 23.2.

Carrying

value

beginning

of year

Acquisition

through

business

combinations

Disposal

through

sale of

subsidiary/

division

Assets

classified as

held for sale

R’000 R’000 R’000 R’000

Group – 2009

Owned

Computer equipment 29 122 296 (1 605) (1 489)

Furniture, fixtures and fittings 6 819 189 (94) –

Improvements to leased premises 6 273 – – (2 056)

Motor vehicles 2 348 – (514) –

Office equipment 606 – (537) (3 248)

Rental equipment 2 235 – (36) –

Total owned 47 403 485 (2 786) (6 793)

Leased

Computer equipment 16 565 – – –

Motor vehicles 901 – – (955)

Total leased 17 466 – – (955)

64 869 485 (2 786) (7 748)



Additions Disposals

Depreciation

related to

disposals Depreciation

Foreign

exchange

differences

Carrying value

end of year

R’000 R’000 R’000 R’000 R’000 R’000

13 247 (1 366) (60) (13 253) (36) 27 020

1 210 (69) (22) (2 227) (7) 5 912

1 902 – – (2 678) – 6 409

610 (227) – (849) – 1 221

1 473 (78) – (2 389) – 1 058

26 472 (6 182) – (13 072) – 28 908

44 914 (7 922) (82) (34 468) (43) 70 528

4 438 – – (10 108) – 14 198

– – – (635) – 1 687

4 438 – – (10 743) – 15 885

49 352 (7 922) (82) (45 211) (43) 86 413

Transfer

from

held for sale Additions Disposals

Depreciation

of assets

classified as

held for sale

Restated

Depreciation

Restated

Foreign

exchange

differences

Carrying

value

end of year

R’000 R’000 R’000 R’000 R’000 R’000 R’000

– 20 717 (3 639) (1 482) (13 250) (88) 28 582

– 2 262 (63) (41) (2 130) (55) 6 887

– 6 252 (26) (318) (2 695) – 7 430

– 1 229 (167) (283) (965) – 1 648

– 7 060 – (913) (1 466) – 1 502

11 616 18 989 (2 055) (29) (9 030) – 21 690

11 616 56 509 (5 950) (3 066) (29 536) (143) 67 739

– 14 034 – – (10 924) – 19 675

– 2 849 (63) – (371) – 2 361

– 16 883 (63) – (11 295) – 22 036

11 616 73 392 (6 013) (3 066) (40 831) (143) 89 775


10 PROPERTY, PLANT AND EQUIPMENT (INCLUDING RENTAL EQUIPMENT) continued

10.2 Movement summary continued

Carrying

value

beginning

of year Additions Disposals Depreciation

Carrying

value

end of year

R’000 R’000 R’000 R’000 R’000

Company – 2010

Owned

Computer equipment 290 25 (2) (228) 85

Furniture, fixtures and fittings 44 9 – (16) 37

Improvements to leased premises 124 – – (49) 75

Office equipment 32 39 – (27) 44

490 73 (2) (320) 241

Company – 2009

Owned

Computer equipment 433 97 – (240) 290

Furniture, fixtures and fittings 41 15 – (12) 44

Improvements to leased premises 96 63 – (35) 124

Office equipment 58 – – (26) 32

628 175 – (313) 490



11 INTANGIBLE ASSETS

Cost

Accumulated

amortisation

Carrying

value

R’000 R’000 R’000

11.1 Group – 2010

Brands 4 683 1 723 2 960


Customer relationships 48 001 23 632 24 369

Development costs 38 040 13 096 24 944

Intellectal property 13 926 7 003 6 923

Set-up costs 11 543 7 791 3 752

Trademarks 18 072 12 036 6 036

351 257 194 440 156 817

Group – 2009

Brands 4 683 1 375 3 308


Customer relationships 48 179 17 727 30 452

Development costs 9 391 3 312 6 079

Intellectual property 10 193 6 903 3 290

Set-up costs 11 543 9 236 2 307

Trademarks 22 387 21 998 389

186 763 107 284 79 479

Company – 2010

Computer software 852 739 113

Trademarks 250 250 –

1 102 989 113

Company – 2009

Computer software 3 456 3 053 403

Trademarks 250 250 –

3 706 3 303 403


11 INTANGIBLE ASSETS continued

11.2 Movement summary

Carrying

value

beginning

of year

Acquisition

through

business

combinations Additions Disposals

R’000 R’000 R’000 R’000

Group – 2010

Brands 3 308 – – –

Computer software 33 654 57 915 14 854 (52)

Customer relationships 30 452 – – –

Development costs 6 079 13 426 8 364 –

Intellectual property 3 290 3 002 732 –

Set-up costs 2 307 – – –

Trademarks 389 6 659 – –

79 479 81 002 23 950 (52)

Carrying

value

beginning

of year

Disposal

through

sale of

subsidiary/

division

Assets

classified as

held for sale Additions

R’000 R’000 R’000 R’000

Group – 2009

Brands 5 144 – (873) –

Computer software 42 494 (4 404) (263) 12 224

Customer relationships 53 125 – (3 338) –

Development costs 6 840 – – 1 562

Intellectual property 3 413 – – –

Set-up costs 4 616 – – –

Trademarks 2 395 – – –

118 027 (4 404) (4 474) 13 786

Carrying

value

beginning

of year Additions Amortisation

Carrying

value

end of year

R’000 R’000 R’000 R’000

Company – 2010

Computer software 403 – (290) 113

Company – 2009

Computer software 688 4 (289) 403



Amortisation

Foreign

exchange

differences

Carrying

value

end of year

R’000 R’000 R’000

(348) – 2 960

(17 815) (723) 87 833

(6 083) – 24 369

(2 697) (228) 24 944

(101) – 6 923

1 445 – 3 752

(1 012) – 6 036

(26 611) (951) 156 817

Disposals

R’000

Transfers

and

re-allocations Amortisation

Amortisation

of assets

classified as

held for sale Impairment

Foreign

exchange

differences

Carrying

value

end of year

R’000 R’000 R’000 R’000 R’000 R’000

– – (348) (615) – – 3 308

(15) 345 (13 227) (476) – (3 024) 33 654

– – (8 554) (8 801) (1 848) (132) 30 452

– (345) (1 728) (250) – – 6 079

– – (123) – – – 3 290

– – (2 309) – – – 2 307

– – (2 006) – – – 389

(15) – (28 295) (10 142) (1 848) (3 156) 79 479


Group

2010

R’000

2009

R’000

12 GOODWILLBalance at beginning of year 237 974 311 660

Acquisitions of subsidiaries (note 33.1) 4 833 13 140

Acquisitions of subsidiaries (note 33.2) 6 396 –

Acquisition of division 775 –

Additional payments to vendors in terms of profit warranty achievements – 4 820

Deferred purchase price on profit warranty achievements – 12 365

Impairment associated with disposed subsidiary (10 402) (7 371)

Impairment of goodwill (note 3.11) – (6 179)

Goodwill associated with disposed subsidiary – (12 247)

Goodwill associated with disposed division – (20 937)

Net effect of foreign exchange differences (961) (7 251)

Goodwill related to disposal group – (50 026)

– Impairment of disposal group classified as held for sale – (8 403)

– Assets classified as held for sale (note 20) – (41 623)

238 615 237 974

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill may be impaired.

In the prior year the Group recognised impairments totalling R22,0 million, of which R15,8 million related to disposed operations and the

balance associated with local and foreign operations experiencing adverse trading conditions.

The recoverable amounts of the cash-generating units (‘CGU’) are determined from value in use calculations using the relevant weighted

average cost of capital for the CGU. The key assumptions for the value in use are those regarding the discount rates, inflation rates, growth

rates, expected changes to selling prices and direct costs during the period.

Management estimates discount rates using the post-taxation rates that reflect current market assessments of the time value of money and

the risks specific to the CGU.

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management and extrapolates cash

flows using these financial projections. A terminal value is calculated based on an estimated growth rate ranging between 4% and 6%.

The rate used to discount the CGU’s forecast cash flows approximates the current Group’s weighted average cost of capital ranging between

12,56% and 16,31%. Sensitivity analysis were performed with varying discount rates applied up to 18,39%. No further indications of

impairment were identified.

Company

2010

R’000

2009

R’000

13 INVESTMENTS IN SUBSIDIARIESShares at cost 203 303 147 083

Indebtedness by subsidiary companies 125 842 116 402

Less: Impairment of investments in subsidiaries 80 639 35 021

248 506 228 464

Details of subsidiaries are reflected on pages 98 and 99.

The loans due by subsidiary companies have no fixed terms of repayment and Group company management have no intention at statement

of financial position date to recall loans due by subsidiary companies. Loans amounting to R86,1 million (2009: R65,3 million) bear interest

at varying rates ranging between 9% and 9,5% (2009: 6,8% and 15,5%). The remaining loans are interest free.

At the financial year end, the company assessed the recoverability of its investments and loans receivable from subsidiary companies and has,

as a consequence, recognised an impairment loss totalling R45,6 million (2009: R35,0 million) associated with certain subsidiary companies.



Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

14 INVESTMENTS

Unlisted investments

Unlisted investments comprise:

– 6 500 (2009: Nil) Variable rate cumulative redeemable preference

shares in Acacia U2 Investments (Proprietary) Limited 65 000 – 65 000 –

– Less: Loans payable to Acacia International Limited,

South African branch (60 000) – – –

– 650 13,38% Redeemable cumulative participating preference

shares in Darrenfield Investments (Proprietary) Limited – 65 000 – 65 000

Less: Loans payable to Quarryfield Investments (Proprietary) Limited – (60 000) – –

– 600 (2009: Nil) Redeemable preference shares in Tactical Software

Systems (Proprietary) Limited, held by UCS Solutions Holdings

(Proprietary) Limited 30 000 – – –

– 430 042 Ordinary shares in Argility Limited – 457 – 363

– 10% of the issued share capital of wiWallet Mobile Payments

(Proprietary) Limited – 567 – 567

35 000 6 024 65 000 65 930

Directors’ valuation of unlisted investments 35 000 6 024 65 000 65 930

14.1 In respect of the redeemable cumulative preference shares in Acacia U2 Investments (Proprietary) Limited, the coupon rate is linked to the

6 month Johannesburg Inter-bank borrowing rate (‘JIBAR’).

These redeemable cumulative preference shares have been pledged as security for loans granted by Acacia International Limited, South

African branch.

The loans from Acacia International Limited, South African branch bear interest at the 6 month JIBAR which is compounded semi-annually

in arrears and is payable six-monthly.

The capital amount of the loans is repayable no later than 1 October 2020. The loans are unsecured in the subsidiary companies but have

been guaranteed by the Company.

As security for the performance of Acacia U2 Investments (Proprietary) Limited, Acacia International Limited, South African branch, has

re-ceded to the company all rights, title and interest to the loans granted to the subsidiaries.

The Company has entered into a Put Option Agreement with ABSA Bank Limited to place any preference shares issued to the company in

Acacia U2 Investments (Proprietary) Limited to ABSA Bank Limited for R10 000 per share.

14.2 The redeemable cumulative participating preference shares in Darrenfield Investments (Proprietary) Limited were redeemed in accordance

with its terms on 31 March 2010. On the same date, the capital amount of the loans from Quarryfield Investments (Proprietary) Limited

were repaid. The terms related to the preference shares in Darrenfield Investments (Proprietary) Limited and the loans from Quarryfield

Investments (Proprietary) Limited are fully disclosed in the 2009 annual financial statements.

14.3 In respect of the redeemable preference shares in Tactical Software Systems (Proprietary) Limited, the coupon rate is linked to the after

taxation average prime overdraft rate and which dividend shall be calculated daily, on the basis of a 365 day year, based on the achievement

of the pre-determined annual performance thresholds by TSS Managed Services (Proprietary) Limited (‘TSSMS’), payable on 30 September

of each year the preference shares are in issue.

The preference shares are redeemable in cash on the achievement of pre-defined performance thresholds by TSSMS in 2012 and 2013,

in equal tranches of 300 preference shares at their subscription price of R15 million for each tranche respectively.

600 of a total 900 preference shares issued to UCS Solutions Holdings (Proprietary) Limited (‘UCS Solutions Holdings’) have been

recognised in UCS Solutions Holdings Statement of financial position following management’s assessment of the likely achievement of the

performance thresholds in respect of the final 300 preference share tranche.



Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

15 LOANS RECEIVABLENon-controlling shareholders’ loans 5 279 2 100 2 250 –

wiWallet Mobile Payments (Proprietary) Limited – 2 613 – 2 613

Zwelethu Recruitments Solutions Close Corporation 1 409 952 2 –

Staff loan scheme 200 400 – –

6 888 6 065 2 252 2 613

Less: Current portion shown under trade and other receivables – 2 100 – –

6 888 3 965 2 252 2 613

Assets classified as held for sale (note 20) – 302 – –

6 888 4 267 2 252 2 613

The loans receivable comprise:

15.1 The non-controlling shareholders’ loans consist of the following:

– The R2,1 million owing by the non-controlling interest shareholder of Destiny Electronic Commerce (Proprietary) Limited in the prior year

was repayable by way of a dividend distribution taking cognisance of the loan covenants imposed by the providers of the acquisition

finance. The loan has been settled in full in November 2009.

– R2,3 million are loans to UCS Dynamics Software Solutions (Proprietary) Limited non-controlling shareholders. These loans are

unsecured, have no fixed repayment terms and bears interest at the rate of prime less 2%.

– R3 million is owing by Cquential Solutions (Proprietary) Limited’s non-controlling shareholders. These loans are unsecured, have no fixed

terms of repayment and bears interest at the rate of prime.

15.2 The loan to wiWallet Mobile Payments (Proprietary) Limited (‘wiWallet’) in the prior year was convertible into equity of wiWallet. In October

2009, UCS exercised its rights in terms of the loan facility agreement and acquired 40% equity interest in wiWallet.

15.3 The loan to Zwelethu Recruitments Solutions Close Corporation represents the Group’s contribution to the Enterprise Development Initiatives

supported by the UCS Group. The loans are unsecured, non-interest bearing and have no fixed date of repayment.

15.4 The staff loan scheme receivables are unsecured, non-interest bearing and have no fixed date of repayment.

16 FINANCE LEASE RECEIVABLES The Group enters into finance lease arrangements with customers for certain of its computer equipment. The average term of finance leases

entered into is between three and five years.

Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

Due within one year 4 201 3 334 – –

Due within two to five years inclusive 8 444 3 721 – –

12 645 7 055 – –

Less: Unearned finance income 2 002 910 – –

Present value of minimum lease payments receivable 10 643 6 145 – –

Included in the financial statements as:

Non-current finance lease receivables 6 645 3 422 – –

Current finance lease receivables 3 998 2 723 – –

10 643 6 145 – –

Finance lease receivables are secured over computer equipment with a carrying value of R7,7 million (2009: R4,8 million). The interest

rate inherent in the leases is fixed at the contract date for the entire lease term. The average effective interest rate contracted is approximately

10,5% per annum (2009: 11,5%) linked to the prime rate of interest from time to time.


Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

17 DEFERRED TAXATIONThe movement in deferred taxation is reconciled as follows:

Balance at beginning of year 26 569 30 183 5 067 3 566

Assets classified as held for sale (note 20) – (1 271) – –

Foreign exchange differences – 39 – –

Income statement (charge) credit (237) 1 100 – 1 501

Income statement charge classified as discontinued operations

(note 7.1) – (8 617) – –

Liabilities directly associated with assets classified as held for sale

(note 20) – 5 053 – –

Net taxable temporary differences arising on business combinations

(note 33.1) (8 752) 82 – –

Balance at end of year 17 580 26 569 5 067 5 067

Comprising:

– Allowances on intangible assets (394) (408) – –

– Capital allowances (369) (250) – –

– Deferred development and set-up costs capitalised (3 070) (968) – –

– Deferred revenue 13 978 16 117 – –

– Estimated taxation losses 14 214 12 158 4 114 4 114

– Equity-settled employee benefit expense (461) (1 075) (141) (141)

– Finance leases (650) (1 176) – –

– Intangible assets arising on business combinations (17 277) (11 663) – –

– Prepayments (723) (619) (38) (38)

– Provisions 12 332 14 453 1 132 1 132

17 580 26 569 5 067 5 067

Certain deferred taxation assets and liabilities have been offset in

accordance with the Group’s accounting policy. The following is the

analysis of the deferred taxation balances (after offset) for balance

sheet purposes:

Deferred taxation assets 32 936 36 141 5 067 5 067

Deferred taxation liabilities (15 356) (9 572) – –

17 580 26 569 5 067 5 067

18 INVENTORIESConsumables 2 266 2 773 – –

Merchandise for resale 48 955 48 292 – –

Work in progress 93 84 – –

51 314 51 149 – –

Less: Provision for obselescence 4 065 3 489 – –

47 249 47 660 – –

Assets classified as held for sale (note 20) – 697 – –

47 249 48 357 – –



Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

19 TRADE AND OTHER RECEIVABLESTrade accounts receivable 162 699 173 791 5 686 1 716

Provision for doubtful debts (3 097) (5 866) – –

159 602 167 925 5 686 1 716

Prepayments 8 866 3 839 795 494

Dividend receivable 3 009 – 3 009 29

Other receivables including staff loans and deposits 7 986 8 098 25 –

Current loans receivable – 2 100 – –

179 463 181 962 9 515 2 239

Assets classified as held for sale (note 20) – 22 842 – –

179 463 204 804 9 515 2 239

The trade receivables of CEB Maintenance Africa (Proprietary) Limited, Destiny Electronic Commerce (Proprietary) Limited and Argility

(Proprietary) Limited have been ceded to Nedbank Limited to secure the acquisition finance for CEB Maintenance Africa (Proprietary)

Limited, Computer Software Consultants (Proprietary) Limited and overdraft facility at UCS Group Limited respectively.

The trade receivables of UCS Technology Services (Proprietary) Limited have been ceded in favour of Nedbank Limited to secure the loan

facility drawn by UCS Software Manufacturing (Proprietary) Limited. Refer note 23.3 and 39.4.

20 ASSETS CLASSIFIED AS HELD FOR SALE In the prior year, TSS Managed Services (Proprietary) Limited had been disclosed as a disposal group and as such the assets and liabilities

associated with this business were classified as held for sale. As at the current financial year end, there were no disposal groups.

Group

2010

R’000

2009

R’000

Assets classified as held for sale

Property, plant and equipment (including rental equipment) – 7 748

Intangible assets – 4 474

Goodwill – 41 623

Loans receivable – 302

Deferred taxation asset – 1 271

Inventories – 697

Trade and other receivables – 22 842

Cash and bank balances – 30 265

– 109 222


Borrowings – 10 310

Deferred taxation liability – 5 053

Trade and other payables – 14 937

Current taxation payable – 4 909

– 35 209


Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

21 SHARE CAPITAL

21.1 Authorised

480 000 000 ordinary shares of 0,5c each 2 400 2 400 2 400 2 400

20 000 000 redeemable compulsory convertible preference shares

of 0,5c each 100 100 100 100

800 000 A class shares 4 4 4 4

1 200 000 B class shares 6 6 6 6

1 600 000 C class shares 8 8 8 8

2 000 000 D class shares 10 10 10 10

2 400 000 E class shares 12 12 12 12

1 600 000 F class shares 8 8 8 8

2 400 000 G class shares 12 12 12 12

3 200 000 H class shares 16 16 16 16

2 000 000 I class shares 10 10 10 10

2 800 000 J class shares 14 14 14 14

Total authorised share capital 2 500 2 500 2 500 2 500

Issued

288 422 658 (2009: 288 422 658) ordinary shares of 0,5c each

net of 3 066 939 (2009: 4 031 996) treasury shares held by

subsidiary companies 1 427 1 422 1 442 1 442

Total issued share capital 1 427 1 422 1 442 1 442

21.2 Rights and limitations attaching to the redeemable preference shares (incentive shares):

A total of 13 324 500 (2009: 13 324 500) incentive shares remain unissued for the benefit of the UCS Group Limited Share Scheme II.

The incentive shares have limited rights relative to the ordinary shares.

The incentive shares are not listed on the JSE Limited.

Holders of the incentive shares have the right to receive a dividend equal to 10% of any dividend declared and paid to ordinary shareholders.

21.3 Detailed conditions and rights relating to the various classes of the compulsory convertible redeemable preference shares may be inspected

at the Company’s registered office.

21.4 The unissued shares are under the control of the directors until the forthcoming annual general meeting with a limitation that the directors

are authorised to allot and issue a maximum of 10% of the Company’s issued share capital in any one financial year.



22 EQUITY-SETTLED EMPLOYEE BENEFITS

22.1 Market priced share option scheme

The UCS Group Limited Share Option Scheme allows certain employees the option to acquire shares in UCS Group Limited over a ten year

period, with the options vesting in tranches of 25% from the grant date. If the options remain unexercised after a period of ten years from

the date of grant, the options expire. Should a scheme member cease to be an employee of the Group, any unexercised options are

forfeited. The exercise price of the options is determined in accordance with the rules of the scheme, being the five day weighted average

value per ordinary share immediately preceding the granting of the option.

These options are settled by means of the issue of shares by UCS Group Limited. Such equity-settled employee benefit payments are

measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled employee benefit payment

is charged as employee costs on a straight-line basis over the period that the employees become unconditionally entitled to the options,

based on management’s estimate of the shares that will vest and adjusted for the effect of non market-based vesting conditions.

The fair value is measured using a stochastic model, based on the standard ‘binomial’ options pricing model (which is mathematically

consistent with the Black-Scholes-Merton model) but allows for the particular features of employee share options to be modelled realistically.

The model used for valuing the employee share option arrangements requires a number of assumptions to be made as inputs. The

assumptions are management’s best estimate of future experience over the expected option term.

The inputs into the model were unchanged for both 2010 and 2009 and are as follows:

Weighted average share price (cents) 428

Weighted average exercise price (cents) 414

Expected volatility 39,26% – 40,92%

Expected life 3 – 5 years

Risk free rate 7,73% – 8,51%

Expected dividend yield 2,41% – 3,17%

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the number of previous years’

corresponding with the option lifetime. The expected life used in the model has been adjusted, based on management’s best estimate, for

the effects of non-transferability, exercise restrictions and behavioural considerations.

The share option employee benefit payment valuation was performed by independent experts for all periods.

Details of the share options during the year are as follows:

2010 2009

Number

of share

options

Weighted

exercise

price

Number

of share

options

Weighted

exercise

price

(’000) (cents) (’000) (cents)

Group

Outstanding at beginning of the year 12 046 151,1 13 236 148,3

Granted during the year – _ 800 187,0

Forfeited during the year (1 657) 197,0 (1 076) 188,1

Exercised during the year (535) 60,7 (914) 99,0

Outstanding at end of the year 9 854 148,27 12 046 151,1

The weighted average share price at the date of exercise of share options exercised during the year approximates the weighted average

share price of 182 cents per share (2009: 169 cents). The options outstanding at the end of the year have a weighted average remaining

contractual life of 4,6 years (2009: 5,8 years).

2010 2009

Number

of share

options

Weighted

exercise

price

Number

of share

options

Weighted

exercise

price

(’000) (cents) (’000) (cents)

Company

Outstanding at beginning of the year 1 200 123,3 700 168,6

Transfer (to)/from subsidiary company (500) 60,0 500 60,0

Outstanding at end of the year 700 168,6 1 200 123,3

The options outstanding at the end of the year have a weighted average remaining contractual life of 4,7 years (2009: 4,8 years).


22 SHARE-BASED PAYMENTS continued

22.2 Zero Cost Incentive Scheme

The Zero Cost Incentive Scheme, which was established in November 2008, is structured to acquire existing shares in the market for the

benefit of eligible employees, including directors and senior executives in the business of UCS. The equity acquired by the scheme will vest

with beneficiaries on a basis to be determined by the UCS Group board or its nominated committee from time to time and which will initially

be over a period of five years from the date of issue in tranches of 10%, 15%, 20%, 25% and 30%. The Zero Cost Option Incentive Shares

are exercisable within 90 days of the respective vesting dates after which time the options lapse. Should a scheme member cease to be an

employee of the Group, any unexercised options are forfeited and the incentive shares placed in an unallocated pool for the benefit of other

potential eligible employees.

The award price of options under this scheme is zero and may, at the election of the UCS Group board or its nominated committee, be

based on such performance criteria as the committee may determine from time to time.

The zero priced options are settled by means of the issue of shares by UCS equity. Such equity-settled employee benefit payments are

measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled employee benefit payment

is charged as employee costs over the period that the employees become unconditionally entitled to the options, based on management’s

estimate of the shares that will vest and adjusted for the effect of non market-based vesting conditions.

In the 2008 financial year, 3 556 865 market priced options were converted to zero cost options. 1 379 790 zero cost options were awarded

in accordance with the conversion. On the date of the conversion, a valuation was performed on these options. The incremental increase

in the fair value of these options will be expensed in terms of IFRS 2 – Share-based Payments, over the new period of the vesting conditions

as set out in the zero cost option scheme, whereas the original value of the options converted as valued in accordance with the market

priced option scheme, will continue to be expensed over the original vesting period in terms of the market priced option scheme.

The fair value is measured using a stochastic model, based on the standard ‘binomial’ options pricing model (which is mathematically

consistent with the Black-Scholes-Merton model) but allows for the particular features of employee share options to be modelled realistically.

The model used for valuing the employee share option arrangements requires a number of assumptions to be made as inputs. The

assumptions are management’s best estimate of future experience over the expected option term.

The inputs applied for the calculation of the value of the converted options at date of transfer are as follows:

Weighted average share price (cents) 214

Expected volatility 34,54% – 40,22%

Expected life 1 – 5 years

Risk free rate 8,99% – 9,53%

Expected dividend yield 2,31%

As a result of the valuation of the converted options, an amount of R4,1 million, representing the incremental increase of the fair value of

the options will be expensed over the vesting period of five years in terms of the Zero Cost Option Scheme.

The inputs applied to the zero cost model for new grants under the scheme for 2009 and 2010 are as follows:

2010 2009

Weighted average share price (cents) 196 195

Expected volatility 41,30% – 49,34% 38,53% – 42,78%

Expected life 2 – 6 years 1 – 5 years

Risk free rate 7,16% – 8,21% 7,67% – 8,23%

Expected dividend yield 4,97% 2,54%

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the number of previous years’

corresponding with the option lifetime. The expected life used in the model has been adjusted, based on management’s best estimate, for

the effects of non-transferability, exercise restrictions and behavioural considerations.

The share option employee benefit valuation was performed by independent experts for all periods.



22 SHARE-BASED PAYMENTS continued

2010 2009

Number

of share

options

Weighted

exercise

price

Number

of share

options

Weighted

exercise

price

(’000) (cents) (’000) (cents)

Group

Outstanding at beginning of the year 2 463 – 2 662 –

Granted during the year 891 – 365 –

Forfeited during the year (169) – (257) –

Exercised during the year (393) – (307) –

Outstanding at end of the year 2 792 – 2 463 –

The weighted average share price at the date of exercise of share options exercised during the year approximates the weighted average

share price of 184 cents (2009: 169 cents) per share.

The Group recognised a total expense of R2,7 million (2009: R3,9 million) relating to equity-settled employee benefit payment transactions

during the year.

2010 2009

Number

of share

options

Weighted

exercise

price

Number

of share

options

Weighted

exercise

price

(’000) (cents) (’000) (cents)

Company

Outstanding at beginning of the year 713 – 403 –

Granted during the year 125 – 365 –

Exercised during the year (83) – (55) –

Outstanding at end of the year 755 – 713 –

The weighted average share price at the date of exercise of share options exercised during the year approximates a weighted average share

price for the year of 169 cents per share.

The company recognised a total expense of R0,6 million (2009: R0,5 million) relating to equity-settled employee benefit payment transactions

during the year.

Equity-settled preference share scheme

The UCS Group Limited Staff Share Scheme II was established during October 2000 and gives certain employees an opportunity to

purchase incentive shares which, provided the requisite achievement of predefined headline earnings per share targets are achieved, would

automatically and compulsorily convert, at staggered intervals, into fully paid ordinary shares.

There are no incentive shares in issue and eligible for conversion into ordinary shares. Nil (2009: 79 500) shares were redeemed during

the year. There were no preference share incentive grants during the current and prior years.


Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

23 BORROWINGSLoans from shareholders of subsidiaries 6 779 5 573 17 706 –

Loans secured by motor vehicles and computer and office equipment 27 395 31 111 – –

Loans secured by cession of debtors 79 799 114 092 – –

Purchase obligations relating to business acquisitions 18 685 20 625 – –

Interest bearing loan 1 750 5 886 – 5 886

Share incentive obligation 4 489 2 251 – –

138 897 179 538 17 706 5 886

Less: Current portion shown under current liabilities (50 670) (75 008) (3 927) (5 886)

88 227 104 530 13 779 –


(note 20) – 10 310 – –

88 227 114 840 13 779 –

23.1 The loans from shareholders of subsidiaries are unsecured and an amount of R1,5 million (2009: R1,5 million) bears interest at the prime

overdraft rate while the balance of the loans are interest free.

23.2 The loans secured by motor vehicles, computer equipment and office equipment comprise the following:

Medium-term loans secured by computer equipment bear interest at varying rates between 10% and 13,25% with varying repayment

terms. The loans are payable in monthly instalments over the next 4 years.

Medium-term loans secured by motor vehicles which amounted to R0,9 million in the prior year relate to TSS Managed Services

(Proprietary) Limited (‘TSSMS’) and were reclassified to liabilities directly associated with assets classified as held for sale.

Medium-term loans secured by computer equipment bear interest at varying rates between 10% and 15,65% with varying repayment

terms. The loans are payable in quarterly installments over the next 4 years. In the prior year R3,0 million relating to TSSMS had been

reclassified to liabilities directly associated with assets classified as held for sale (note 20).

23.3 The loans secured by cession of debtors comprise medium-term loan facilities with Nedbank Limited and comprise the following:

Acquisition finance raised to fund the purchase price obligations relating to the acquisition of the going concern business of CEB

Maintenance Africa (Proprietary) Limited (‘CEB’). The loans, which relate to the first, second and third and final payment due to the

previous vendors of CEB bear interest at 7,5% respectively and the last installments are payable in November 2010, November 2011

and January 2013 respectively.

Acquisition finance raised to fund the purchase price obligation relating to the acquisition of the going concern business of Computer

Software Consultants. The loan, which contributes to the initial purchase price paid on implementation of the transaction, bears interest

at 7,5% and is repayable in monthly installments of R1,1 million. The final installment in respect of the five-year loan is payable on

1 September 2013.

Medium-term loan raised in UCS Software Manufacturing (Proprietary) Limited referred to in note 23.5. The loan is repayable over five

years in monthly installments of R1 million and currently bears interest at 7,5%.

23.4 Purchase obligations relating to business acquisitions relate to the deferred consideration on the acquisition of Cquential Solutions

(Proprietary) Limited and are carried at amortised cost bearing interest at the Group’s after taxation cost of debt. The balance in the prior

year which relates to the deferred consideration associated with TSS Managed Services (Proprietary) Limited was classified as held for sale

and was fully repaid in the current year.

23.5 The interest bearing loan in the current year is owing to IBM Global finance and relates to finance obtained for the acquisition of software. The

loans are unsecured, bear interest at variable rates between 14,4% and 17,1% and is repayable quarterly in advance over the next two years.

23.6 The interest bearing loan in the prior year related to the loan agreement with Argility (Proprietary) Limited. The loan eliminates on

consolidation following the acquisition by UCS Group Limited of the entire issued share capital of Argility (Proprietary) Limited in June 2010.

Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

Interest and non-interest bearing borrowings

Interest bearing borrowings 129 139 173 202 17 706 5 886

Non-interest bearing borrowings 9 758 6 336 – –

138 897 179 538 17 706 5 886



Company

2010

R’000

2009

R’000

24 STAFF SHARE TRUSTThe UCS Group Limited Staff Share Trust 2 515 1 875

These loans are unsecured, non-interest bearing and have no fixed terms for repayment. Management

will not call these loans for repayment within 12 months

Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

25 TRADE AND OTHER PAYABLESTrade payables 66 856 55 249 548 461

Advance billings 32 053 26 365 – –

Sundry payables and accruals 124 767 122 524 9 996 7 080

223 676 204 138 10 544 7 541


(note 20) – 14 937 – –

223 676 219 075 10 544 7 541

Provision

for legal

claims

Provision

for

contractual

commitments

Other

provisions

Total

provisions

R’000 R’000 R’000 R’000

26 PROVISIONS

Group – 2010

Balance beginning of year 1 000 8 795 1 809 11 604

Amounts utilised – (16 128) (620) (16 748)

Amounts provided 160 12 793 20 12 973

Amounts released – (1 400) – (1 400)

Acquisition of subsidiaries (note 33.2) – – 39 39

Balance end of year 1 160 4 060 1 248 6 468

Group – 2009

Balance beginning of year 1 000 7 605 1 117 9 722

Amounts utilised – (10 104) (54) (10 158)

Amounts provided – 15 124 746 15 870

Amounts released – (4 882) – (4 882)

Disposal of division by subsidiary company – 1 052 – 1 052

Balance end of year 1 000 8 795 1 809 11 604

The provision for legal claims relates to a potential claim presented in 2008 in respect of a contractual relationship in place at a subsidiary

company level. Although the outcome of the claim has not been concluded, management have made provision for a potential settlement

in respect thereof. A contingent liability in respect of the potential claim is disclosed in note 37.

The provisions for contractual commitments relate to certain customer contracts where the estimated cost to deliver on the contractual

obligations exceeded the contracted contribution.

Other provisions relate largely to estimated programmers commission payable to employees at the discretion of management based on

productivity incentives.


Company

2010 2009

R’000 R’000

27 LOANS FROM SUBSIDIARIESAccsys (Proprietary) Limited 936 21 523

Computerkit Holdings (Proprietary) Limited – 1 357

Destiny Electronic Commerce (Proprietary) Limited 10 397 10 013

Fernridge Consulting (Proprietary) Limited 2 578 2 137

GAAP Point of Sale (Proprietary) Limited 27 –

Universal Knowledge Software (Proprietary) Limited 3 140 10 147

UCS Dynamics Software Solutions (Proprietary) Limited 2 969 –

UCS Software (Proprietary) Limited 36 519 55 644

UCS Solutions (Proprietary) Limited 63 701 45 573

UCS Solutions Holdings (Proprietary) Limited 33 327 –

UCS Technology Services (Proprietary) Limited 36 353 –

189 947 146 394

Loans from subsidiaries are unsecured and balances totalling R56,5 million (2009: R89,5 million) bear interest at the call account rate from

time to time. No date has been specified for the repayment of these loans.

Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

28 CASH GENERATED FROM (UTILISED BY) OPERATIONS

BEFORE WORKING CAPITAL CHANGES

Continuing and discontinued operations

Profit before taxation 92 655 89 852 (23 192) (30 109)

Adjustments for:

Decrease in provisions (7 367) – – –

Deferred revenue (11 000) 33 000 – –

Depreciation and amortisation 71 904 82 334 610 602

Dividend received (3 009) – – –

Equity-settled employee benefit expense 2 656 3 910 107 272

Fair value adjustments 1 327 – (12) –

Finance charges 13 835 23 748 3 133 4 732

Impairment classified as discontinued operations 30 977 15 774 – –

Impairment of goodwill – 6 179 – –

Impairment of intangible assets – 1 848 – –

Impairment of investment in subsidiaries – – 45 618 35 021

Investment revenues (6 156) (6 855) (41 357) (28 160)

Loss (profit) on disposal of subsidiary – 4 559 39 (1 325)

Net loss on disposal of property, plant and equipment

(including rental equipment) and intangible assets (3 112) (579) 2 –

Net foreign exchange differences 5 944 12 950 – –

Profit on treasury shares utilised for allotment (1 738) – – –

Profit on sale of a division by a subsidiary company (14 491) (33 263) – –

172 425 233 457 (15 052) (18 967)

29 WORKING CAPITAL CHANGESIncrease in inventories (165) (8 841) – –

Decrease (increase) in trade and other receivables 4 819 14 165 (7 276) (1 279)

Increase in trade and other payables 14 062 3 179 3 003 4 656

18 716 8 503 (4 273) 3 377



Group Company

2010

R’000

2009

R’000

2010

R’000

2009

R’000

30 TAXATION PAIDAmount prepaid (unpaid) at beginning of year 886 (20 819) 234 234

Liability directly associated with assets held for sale (note 20) – 4 909 – –

Taxation charge for the year (42 811) (41 764) (1 617) (1 148)

Amount prepaid at end of year (856) (886) (234) (234)

Taxation paid (42 781) (58 560) (1 617) (1 148)

31 ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

(INCLUDING RENTAL EQUIPMENT)Computer equipment 13 600 21 013 25 97


Improvements to leased premises 1 902 6 252 – 63

Motor vehicles 610 1 229 – –

Office equipment 1 485 7 060 39 –

Rental equipment 26 472 18 989 – –

Leased computer equipment 4 631 14 034 – –

Leased motor vehicles – 2 849 – –

50 135 73 877 73 175

Less: shown under acquisition of subsidiaries (note 33.1) 658 485 – –

Less: shown under acquisition of subsidiaries (note 33.2) 99 – – –

Less: acquisition of division 26 – – –

49 352 73 392 73 175

32 ACQUISITION OF INTANGIBLE ASSETSComputer Software 72 769 12 224 – 4

Development costs 21 790 1 562 – –

Intellectual property 3 734 – – –

Trademarks 6 659 – – –

104 952 13 786 – 4

Less: shown under acquisition of subsidiaries (note 33.1) 34 288 – – –

Less: shown under acquisition of subsidiaries (note 33.2) 45 814 – – –

Less: acquisition of division 900 – – –

23 950 13 786 – 4


33 ACQUISITION OF SUBSIDIARIES

33.1 The following acquisitions were concluded during the year:

1. In respect of the loan facility entered into with WiWallet Mobile Payments (Proprietary) Limited (‘wiWallet’), UCS exercised its rights in

terms of the option agreement whereby the agreed total start up facility of R1,76 million was converted into 40% equity interest in

wiWallet, taking its total equity ownership to 50% with effect from 27 October 2009. In August 2010, UCS acquired a further 1% for a

consideration of R1,2 million resulting in a 51% equity ownership in wiWallet.

2. With effect from 30 November 2009 UCS entered into a Sale of Shares Agreement whereby it increased its 51% interest in Lifeworld

Group (Proprietary) Limited (‘Lifeworld’) to 100% for a nominal consideration. The company subsequently changed its name to

Innervation Value Added Services (Proprietary) Limited.

3. With effect from 1 December 2009, Lifeworld acquired the going concern business referred to as the Radical Business Unit from

Dynamic Visual Technologies (Gauteng) (Proprietary) Limited for a total cash consideration of R1,5 million, net of working capital

requirements.

4. On 9 April 2010, UCS entered into a Sale of Shares Agreement for the acquisition of 51% of the issued share capital of Volume and

Affinity Risk Management (Proprietary) Limited for a purchase consideration of R1 million with a further potential upside payment limited

to a maximum of R5 million.

5. Effective 30 April 2010, UCS entered into a Sale of Shares and Claims Agreement with the Industrial Development Corporation of South

Africa Limited (‘IDC’) to acquire 49% of the issued share capital of Cquential Solutions (Proprietary) Limited (‘Cquential’) and all claims

which the IDC may have against Cquential for a purchase consideration of R12 million with a further potential upside payment capped

at R10 million. UCS further entered into a Sale of Shares Agreement with the remaining shareholders of Cquential being predominantly

management, to acquire a further 7% equity interest in Cquential for a nominal purchase consideration of R28. In addition, UCS will

provide working capital funding limited to a maximum of R15 million.

The net assets (including goodwill) acquired as a result of these transactions are as follows:

Acquiree’s

carrying

values at

acquisition

Fair value

adjustments Fair value

R’000 R’000 R’000

Property, plant and equipment (including rental equipment) 658 – 658

Intangible assets 3 001 31 287 34 288

Loans receivable 2 911 – 2 911

Deferred taxation asset 2 067 (2 067) –

Trade and other receivables 580 – 580

Cash and bank balances 547 – 547

Borrowings (14 346) – (14 346)

Deferred taxation liability – (8 752) (8 752)

Trade and other payables (1 060) – (1 060)

Net asset value acquired (5 642) 20 468 14 826

Non-controlling interest’s share in net asset value (6 404)

Change in subsidiary shareholding reserve arising on acquisition 597

Goodwill arising on acquisition 4 833

Total purchase consideration 13 852

Made up as follows:

– Cash consideration paid 2 206

– Deferred loan payment 8 117

– Investment consideration paid in prior years converted to subsidiary 569

– Loan funding convertible into equity of wiWallet Mobile Payments (Proprietary) Limited

– advanced in prior year 1 520

– advanced in current year 1 440

13 852

Total cash consideration made up as follows:

Cash consideration paid 2 206

Less: Cash and cash equivalents acquired (547)

1 659



33 ACQUISITION OF SUBSIDIARIES continued

33.2 The following acquisition was concluded during the year:

1. On 15 March 2010, UCS announced it had formally submitted to the Argility Limited (‘Argility’) board of directors a notice of its firm

intention to make an offer to the Argility shareholders to acquire the issued ordinary share capital in Argility held by them by way of a

scheme of arrangement in terms of Section 311 of the Companies Act No 61 of 1973, as amended (‘Companies Act’). Following approval

by in excess of 90% of the UCS shareholders who were entitled to vote at the UCS general meeting held on 12 April 2010 and the 100%

approval of the scheme by Argility shareholders present or represented by proxy at the general meeting held on 11 May 2010, the court

granted an order sanctioning the scheme in terms of Section 311 of the Companies Act on 18 May 2010. Accordingly with effect from

1 June 2010, UCS acquired the entire issued share capital of Argility, which shares were acquired in terms of the scheme, for a cash

purchase consideration of R1,55 per Argility share being R44,2 million in the aggregate.

The net assets (including goodwill) acquired as a result of the transaction is as follows:

Acquiree’s

carrying

values at

acquisition

Fair value

adjustments Fair value

R’000 R’000 R’000

Property, plant and equipment (including rental equipment) 99 – 99

Intangible assets 45 814 – 45 814

Loans receivable (8 334) – (8 334)

Trade and other receivables 4 571 – 4 571

Cash and bank balances 108 – 108

Trade and other payables (4 388) – (4 388)

Provisions (39) – (39)

Net asset value acquired 37 831 – 37 831

Goodwill arising on acquisition 6 396

Total purchase consideration 44 227

Made up as follows:

– Cash consideration paid 44 227

44 227

Total cash consideration made up as follows:

Cash consideration paid 44 227

Less: Proceeds on Argility Limited shares held pre-acquisition (771)

Less: Cash and cash equivalents acquired (108)

43 348


34 DISPOSAL OF SUBSIDIARIES

34.1 TSS Managed Services (Proprietary) Limited

Prior to the 2009 financial year end, UCS Solutions Holdings (Proprietary) Limited (‘UCS Solutions Holdings’) concluded a Share Purchase

and Repurchase Agreement with Tactical Software Systems (Proprietary) Limited and TSS Managed Services (Proprietary) Limited

(‘TSSMS’) whereby UCS Solutions Holdings agreed to dispose of its entire 60% shareholding in TSSMS by way of the repurchase and the

share sale, in one composite transaction. The total potential transaction consideration (inclusive of a potential upside capped at a maximum

further R45 million) could be R125 million (excluding interest and dividends). The transaction was approved by shareholders at a

general meeting held on 3 November 2009 which represented the final suspensive condition to concluding the transaction.

34.2 UCS Solutions Incorporated

With effect from 31 August 2010, Universal Computer Software UK Limited (‘UCS UK’), a wholly owned subsidiary of UCS Group Limited,

disposed of its entire 92,5% equity interest in UCS Solutions Incorporated to the management shareholders who held the remaining 7,5%

for a nominal consideration of $1.

The net assets disposed of as a result of the transactions are as follows:

Group

2010

R’000

Property, plant and equipment (including rental equipment) 239

Trade and other receivables 6 516

Cash and bank balances 1 659

Assets classified as held for sale (note 20) 109 222

Trade and other payables (20 564)

Liabilities directly associated with assets classified as held for sale (note 20) (35 209)

Net asset value disposed 61 863

Change in subsidiary shareholding reserve disposed 652

Non-controlling interest’s share in net asset value (14 506)

Total disposal consideration 48 009

Less: Consideration received (32 500)

Investment acquired (30 000)

Profit on disposal of subsidiary (14 491)

Total cash consideration is made up as follows:

Cash consideration received 32 500

Less: Cash and bank balances disposed (1 659)

30 841



35 COMMITMENTS Group

2010 2009

R’000 R’000

35.1 Operating lease commitments – Property

Due within one year 34 004 29 887

Due within two to five years 66 105 67 753

100 109 97 640

35.2 Operating lease commitments – Equipment

Due within one year 291 366

Due within two to five years 25 295

316 661

35.3 Operating lease commitments – Motor vehicles

Due within one year 924 740

Due within two to five years 913 853

1 837 1 593

Total operating lease commitments 102 262 99 894

35.4 Capital commitments

Commitments in respect of capital expenditure approved by the directors of a subsidiary

– not yet contracted for 79 576 49 827

– contracted for 3 154 16 079

82 730 65 906

Capital commitments amounting to R63,8 million (2009: R51,8 million) are expected to be financed from internal cash resources while the

balance of R18,9 million (2009: R14,1 million) are expected to be financed with external financiers.

36 FINANCIAL RISK MANAGEMENT

Overview

The Group’s activities expose it to a variety of risks, including the effect of foreign currency exchange rates and interest rates. The Group’s

overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects

on the financial performance of the Group. Group companies use derivative financial instruments such as foreign exchange contracts to

hedge certain expected exposures.

The Group has exposure to the following risks from its use of financial instruments:

– credit risk;

– liquidity risk; and

– market risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for

measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these

financial statements.

The board of directors has overall responsibility for the establishment and oversight of the Group’s risk managements framework.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits

and controls and to monitor adherence thereto. Risk management policies and systems are reviewed regularly to reflect changes in market

conditions and the Groups activities. The Group, through its training in management standards and procedures, aims to develop a

disciplined and constructive control environment in which all employees understand their roles and obligations.

The Group’s internal audit function, outsourced in the current and prior year to PricewaterhouseCoopers, undertakes both regular and

ad-hoc reviews of risk management controls and procedures, the results of which are reported to the Group Audit and Risk Committee.


36 FINANCIAL RISK MANAGEMENT continued

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual

obligations and arises principally from the Group’s receivables from customers.

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s

customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

Group companies have established credit policies aligned with best practice recommendations, under which new customers are analysed

individually for creditworthiness before the respective company’s standard payment and delivery terms and conditions are offered. Customers

that fail to meet benchmark creditworthiness may contract with the company only on cash before delivery basis.

In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual

or legal entity, geographic location, ageing profile, maturity and existence of previous financial difficulties. Collateral is not obtained, however,

whilst deeds of suretyship are obtained in certain circumstances.

Goods are sold subject to retention title clauses found in sales agreements signed with certain customers, so that in the event of non-payment,

the company has the right to claim restitution of the goods.

The Group establishes an allowance for impairment that represents its estimate of anticipated losses in respect of trade and other receivables.

This allowance represents a potential specific loss relating to individual specific exposures.

Liquidity risk

Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The Group’s approach to managing

liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed

conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Typically the Group ensures that it has sufficient cash available, as well as lines of credit, to meet expected operational expenses, including

the servicing of financial obligations. The Group endeavours to mitigate the potential negative impacts of extreme circumstances that cannot

reasonably be predicted, such as major catastrophes like business interruption and public liability.

As far as possible these risks are mitigated through short-term insurance policies, however the costs associated with such cover are

critically evaluated.

The Group’s liquidity requirements are assessed on an ongoing basis as part of the Group’s treasury function. No significant risk exists as

the Group operates within its estimated optimal capital structure with a conservative interest cover ratio and operations generate positive

cash flows on an aggregated basis.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or the

value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within

acceptable parameters, while optimising the return on risk.

Where material exposures linked to offshore procurement of goods or services exist, the Group enters into forward exchange contracts with

approved institutions in order to manage its market risks.

The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional

currencies of the Group, being South African Rand. The currency in which these transactions primarily are denominated are United States

Dollar and British Pound.




Capital management

The capital structure of the Group consists of debt, which includes interest-bearing borrowings and obligations due under finance leases

disclosed (note 23), cash and cash equivalents and equity attributable to equity holders of the Group which comprises issued share capital

and premium, disclosed under note 21, and accumulated profits.

The Group’s capital management objective is to achieve an optimal weighted average cost of capital while continuing to safeguard the

Group’s ability to meet its liquidity requirements (including its commitments in respect of capital expenditure), repay borrowings as they fall

due and continue as a going concern.

The policy of the Group is to achieve sufficient gearing so as to have an optimal weighted average cost of capital while also ensuring that

at all times its creditworthiness is considered to be at least investment grade.

The Group has entered into a number of debt facilities that dictate certain requirements in respect of capital management. These covenants

are a key consideration when the capital management strategies of the Group are evaluated.

These covenants include cash to debt service covers and maximum net debt/asset net worth ratios.

The Group has complied with these requirements in the current and prior year.

Group

2010 2009

R’000 R’000

Financial assets comprise:

Non-current assets

Investments 35 000 6 024

Loans receivable 6 888 3 965

Finance lease receivables 6 645 3 422

Total non-current assets 48 533 13 411

Current assets

Trade and other receivables* 179 148 181 751


Cash and bank balances 131 885 177 764

Total current assets 315 031 362 238

Total financial assets 363 564 375 649

* Statutory VAT receivables totalling R0,3 million (2009: R0,2 million) have been excluded from trade and other receivables for financial asset classification purposes.

Categories of financial assets

Trade accounts receivable are categorised according to the market segments in which Group operates. The market segments are defined as

retail, government institutions, financial services and other. Trade accounts receivables which cannot be defined as either retail, government

or financial services are included in the ‘other’ category along with the balance of financial assets.



Loans and

receivables

FVTPL#/

Held for

trading

Other

financial

assets Total Fair value

R’000 R’000 R’000 R’000 R’000

Financial assets

2010

Retail 147 589 – – 147 589 147 589

Government Institutions 8 723 – – 8 723 8 723

Financial Services 15 062 – – 15 062 15 062

Other 157 190 – 35 000 192 190 192 190

328 564 – 35 000 363 564 363 564

2009

Retail 137 577 – – 137 577 137 577

Government Institutions 2 960 – – 2 960 2 960

Financial Services 9 501 – – 9 501 9 501

Other 219 587 457 5 567 225 611 225 611

369 625 457 5 567 375 649 375 649

# Fair value through profit and loss (‘FVTPL’).

Group

Total Fair value

R’000 R’000


2010

Borrowings* 134 408 134 408

Trade and other payables** 213 794 213 794

Deferred revenue 28 556 28 556

376 758 376 758

2009

Borrowings* 177 287 177 287

Trade and other payables** 189 767 189 767

Deferred revenue 39 297 39 297

406 351 406 351

* Share incentive obligation of R4,5 million (2009: R2,3 million) is excluded from borrowings as disclosed in the balance sheet for financial liability classification purposes.

** Statutory VAT payables totalling R9,9 million (2009: R14,3 million) have been excluded from trade and other payables as disclosed in the balance sheet for financial liability classification purposes.




36.1 Exposure to credit risk

The maximum exposure to credit risk at the reporting date was:

Group

2010 2009

R’000 R’000

Trade and other receivables (net of provision for doubtful debts) 179 148 181 751

Provision for doubtful debts 3 097 5 866

182 245 187 617


Loans receivable 6 888 3 965


Cash and bank balances 131 885 177 764

366 661 381 515

Neither

past due

nor impaired

Re-

negotiated Past due Impaired Total

R’000 R’000 R’000 R’000 R’000

2010

Retail 124 806 – 22 783 2 560 150 149

Government Institutions 6 018 – 2 705 210 8 933

Financial Services 14 470 59 533 62 15 124

Other 189 394 336 2 460 265 192 455

334 688 395 28 481 3 097 366 661

2009

Retail 110 796 11 600 15 181 5 061 142 638

Government Institutions 2 927 – 33 1 2 961


Other 221 884 – 3 727 515 226 126

344 238 11 850 19 561 5 866 381 515

Group

2010 2009

R’000 R’000

Trade receivables

Trade receivables 162 699 173 791

Provision for doubtful debts (3 097) (5 866)

Net trade receivables 159 602 167 925

Provision for doubtful debts movement

Balance at beginning of year 5 866 7 443

Impairment losses recognised 958 4 742

Impairment losses released (781) (16)

Balances written off (2 945) (3 372)

Foreign exchange differences (1) (4)

Balances disposed through business combinations – (2 927)

Balance at end of year 3 097 5 866



0 – 30

days

30 – 90

days

90 – 365

days

365 days

onwards Total

R’000 R’000 R’000 R’000 R’000

2010

Aged trade receivables

Retail 107 709 18 271 4 960 3 390 134 330

Government Institutions 5 594 527 2 392 210 8 723


Other 7 142 4 164 1 870 263 13 439

125 959 23 540 9 317 3 883 162 699

2010

Aged provision for doubtful debts

Retail 478 – 2 048 34 2 560

Government Institutions – – – 210 210

Financial Services – – 62 – 62

Other 14 – – 251 265

492 – 2 110 495 3 097

2009

Aged trade receivables

Retail 102 107 23 004 7 070 4 312 136 493

Government Institutions 1 195 1 732 34 – 2 961

Financial Services 7 817 1 258 774 – 9 849

Other 17 711 3 582 2 935 260 24 488

128 830 29 576 10 813 4 572 173 791

2009

Aged provision for doubtful debts

Retail 154 323 1 494 3 090 5 061

Government Institutions – 1 – – 1

Financial Services (46) 120 215 – 289

Other – – 205 310 515

108 444 1 914 3 400 5 866




36.2 Exposure to currency risk

The carrying amount of the Group’s foreign currency denominated financial assets and liabilities at Statement of financial position date

is as follows:

South

African

Rand

United

States

Dollar

British

Pound Other Total

(Rand) (Rand) (Rand) (Rand) (Rand)

2010

Financial assets

Retail 137 621 1 402 8 566 – 147 589

Government Institutions 8 723 – – – 8 723

Financial Services 14 781 281 – – 15 062

Other 155 868 511 35 811 – 192 190

316 993 2 194 44 377 – 363 564

2009

Financial assets

Retail 128 447 6 619 2 511 – 137 577

Government Institutions 2 640 – – 320 2 960

Financial Services 8 711 373 – 417 9 501

Other 163 196 6 293 55 737 385 225 611

302 994 13 285 58 248 1 122 375 649

2010


Borrowings 134 408 – – – 134 408

Trade and other payables 84 413 7 393 121 988 – 213 794

Deferred revenue 25 007 1 378 2 171 – 28 556

243 828 8 771 124 159 – 376 758

2009


Borrowings 177 287 – – – 177 287

Trade and other payables 59 885 22 070 107 812 – 189 767

Deferred revenue 34 857 1 399 3 041 – 39 297

272 029 23 469 110 853 – 406 351

The following significant exchange rates were applied during the year:

Average rate Closing rate

2010 2009 2010 2009

United States Dollar 7,47 9,05 6,99 7,44

British Pound 11,65 13,94 11,10 11,99



Foreign currency sensitivity

The United States Dollar and British Pound are the primary currencies to which the Group is exposed. The following table indicates

the Group’s sensitivity at year end assuming a 10% strengthening of the Rand against the United States Dollar and British Pound at

30 September 2010 on financial instruments excluding forward foreign exchange contracts. The rates of sensitivity represent management’s

assessment of the possible change in reporting foreign currency rates as at the financial year end date and is not intended to represent a

management forecast. The analysis assumes that all other variables, in particular interest rates, remain constant and is applied against the

gross Statement of financial position exposure.

United States British

Dollar Pound

R’000 R’000

2010

Profit 658 7 978

Financial Assets 1 974 39 938

Financial Liabilities 9 648 136 576

2009

Profit 1 019 5 260

Financial Assets 11 956 52 424

Financial Liabilities 25 817 121 938

A 10% weakening of the South African Rand against the above currencies at 30 September 2010 would have had the equal but opposite

effect to the amounts shown above, on the basis that all other variables remain constant.

Forward foreign exchange contracts

Although the Group operates in a global business environment, less than 5% (2009: 5%) of financial assets and financial liabilities as at

the financial year end comprise foreign denominated financial assets and liabilities. When appropriate and practical, through the use of

financial instruments which typically comprise forward exchange contracts, the exposure to foreign currency risk is managed.

Maturing

within

12 months

Average

foreign

exchange

rates Fair value

purchases purchases purchases

R’000 R’000 R’000

2010

US Dollar 565 7,71 534

2009

US Dollar 2 443 7,82 2 443

Foreign currency sensitivity

The following table indicates the Group’s sensitivity of the outstanding forward exchange contracts at balance sheet date assuming a 10%

strengthening of the South African Rand against the United States Dollar which is the primary currency in which the Group has entered

into forward foreign exchange contracts. The rates of sensitivity represent management’s assessment of the possible change in reporting

foreign currency exchange rates. The analysis assumes that all other variables, in particular interest rates, remain constant and is applied

against the gross balance sheet exposure.




United States

Dollar

R’000

2010

Loss (56)

Derivative financial assets 508

2009

Loss (244)

Derivative financial assets 2 198

A 10% weakening of the South African Rand against the United States Dollar at 30 September 2010 would have had the equal but opposite

effect on the above forward foreign currency contract to the amount shown above, on the basis that all other variables remain constant.

36.3 Interest rate risk

The carrying amount of the Group’s financial assets and liabilities at balance sheet date that are subject to interest rate risk is as follows:

Floating

interest

rate

Non-interest

bearing Total

R’000 R’000 R’000

2010

Financial assets

Retail 10 643 136 946 147 589

Government Institutions – 8 723 8 723

Financial Services – 15 062 15 062

Other 131 885 60 305 192 190

142 528 221 036 363 564

2009

Financial assets

Retail 6 145 131 432 137 577

Government Institutions – 2 960 2 960

Financial Services – 9 501 9 501

Other 186 009 39 602 225 611

192 154 183 495 375 649

2010


Borrowings 129 139 5 269 134 408

Trade and other payables – 213 794 213 794

Deferred revenue – 28 556 28 556

129 139 247 619 376 758

2009


Borrowings 173 202 4 085 177 287

Trade and other payables – 189 767 189 767

Deferred revenue – 39 297 39 297

173 202 233 149 406 351

The Group has no fixed interest rate borrowings in the current and prior year.

The Group is sensitive to the movements in the South African interest rates which are the primary interest rates to which the Group is

exposed. The rates of sensitivity represent an assessment of the possible change in interest rates and is not intended to represent a

management forecast. If the South African interest rate decreased by 100 basis points (2009: 200 basis points) at year end, then income

for the year would have increased by R0,2 million (2009: R3,6 million).



36.4 Liquidity risk

The following are contractual maturities of financial liabilities, including interest payments and excluding the impact of netting agreements.

0 – 1 years 2 – 5 years Thereafter

R’000 R’000 R’000

2010

Non-derivative financial liabilities

Borrowings – 84 127 –

Current portion of borrowings 55 988 – –

Trade and other payables 213 794 – –

Deferred revenue 17 556 11 000 –

287 338 95 127 –

2009

Non-derivative financial liabilities

Borrowings – 104 902 –

Current portion of borrowings 87 605 – –

Trade and other payables 189 768 – –

Deferred revenue 17 297 22 000 –

294 670 126 902 –

Group

2010 2009

R’000 R’000

Gearing ratio

Total debt 138 897 179 538

Less: Cash and bank balances (131 885) (177 764)

Net debt 7 012 1 774

Total equity 513 812 497 639

Net debt to equity ratio 1,4% 0,4%



37 CONTINGENT LIABILITIES

37.1 A claim for repudiation of contract and damages has been presented to a subsidiary company. As disclosed in note 26, a provision of

R1,1 million is carried at the financial year end which represents management’s assessment of the likely settlement of the dispute which

may differ to the final settlement consideration to be concluded by the parties.

37.2 In accordance with the Sale of Shares Agreement entered into with the vendors Volume and Affinity Risk Management (Proprietary) Limited

(‘V&A Risk’), additional amounts are payable to the vendors of V&A Risk to the extent that the business achieves or exceeds certain growth

profit targets. Potential upside payments limited to a maximum of R5 million have not been provided for as at the financial year end.

38 GUARANTEES

38.1 Guarantees amounting to R2,7 million (2009: R2,5 million) for the rental of premises by subsidiary companies have been issued by the

bankers of those subsidiaries in favour of their landlords.

38.2 In respect of the acquisition finance raised from Nedbank Limited for the purchase consideration for the going concern business of CEB

Maintenance Africa (Proprietary) Limited (‘CEB’), UCS Group Limited (‘UCS’) has provided a limited suretyship of R46 million while UCS

Solutions Holdings (Proprietary) Limited has provided limited suretyship of R52 million including a cession of loan funds and an unrestricted

cession of all present and future debtors in CEB Maintenance Africa (Proprietary) Limited in favour of Nedbank Limited.

38.3 Nedbank Limited has made available an overdraft facility of R20 million to UCS. Argility (Proprietary) Limited (‘Argility’), a wholly owned

subsidiary of UCS, has ceded its present and future trade debtors and provided a suretyship limited to the amount outstanding from time

to time, with a maximum of R20 million, in favour of the bankers.

38.4 In respect of the medium-term loan facility raised with Nedbank Limited, UCS as well as wholly owned subsidiary companies, UCS Business

Support Services (Proprietary) Limited (‘UCS BSS’), UCS Solutions Holdings (Proprietary) Limited (‘UCS Solutions Holdings’), Accsys

(Proprietary) Limited (‘Accsys’), Argility and UCS Technology Services (Proprietary) Limited (‘UCS TS’) have provided a limited suretyship

of R50 million in favour of Nedbank Limited. In addition, Argility has ceded all present and future trade debtors in favour of Nedbank Limited.

38.5 In respect of the acquisition finance raised from Nedbank Limited for the purchase consideration for the going concern business of

Computer Software Consultants (‘CSC’), UCS as well as wholly owned subsidiary companies, UCS TS, UCS BSS, UCS Solutions Holdings,

Accsys and Argility have provided limited suretyships of R53 million including a cession of all present and future debtors in CSC in favour

of the bankers.

38.6 In respect of sale and leaseback transactions entered into with Merchant West Asset Finance (Proprietary) Limited, UCS has provided a

limited suretyship of R14,7 million (2009: R9 million) in favour of the financier.

38.7 In respect of a finance lease transactions concluded with IBM South Africa (Proprietary) Limited by UCS Solutions (Proprietary) Limited,

UCS has provided a limited suretyship of R2,45 million (2009: R1,6 million) in favour of the financier.


39 RELATED PARTY TRANSACTIONS The holding company and subsidiaries are considered to be related parties. Various sale and purchase transactions, under terms that are

no less favourable than those arranged with third parties on an arm’s length basis, were entered into between group companies. These

transactions have been eliminated on consolidation and are not disclosed in this note.

Details of transactions between the Group and other related parties are disclosed below.

Compensation of key management personnel

The remuneration of directors and other key management (defined as the UCS Group Executives and Chief Executive Officers of material

subsidiary companies) were as follows:

2010

R’000

2009

R’000

Short-term benefits 24 062 20 623

The remuneration of the twelve (2009: eleven) directors and key executives is determined by the remuneration committee having regard

to the performance of individuals, market trends and promotions, where applicable.

Other related party transactions

39.1 Group companies entered into consulting arrangements with a company associated with Mr BP Hattingh, a non-executive director of the

Company, for executive placements and human capital cultural surveys. A total of R0,5 million (2009: R0,2 million) was paid for these

services which are considered to be at arm’s length taking cognisance of market related circumstances.

39.2 UCS Software (Proprietary) Limited (‘UCS Software’), a wholly owned subsidiary of UCS, earned commission on the sale of Argility’s software

products, prior to the UCS acquisition of Argility in June 2010. The total resellers’ commission earned amounts to R1,1 million for the period

to June 2010 (2009: R4,7 million for the year). In addition, in the prior year, UCS Software, contracted for training and development services

from Argility totalling R0,6 million.

39.3 UCS Software Manufacturing (Proprietary) Limited (‘UCSSM’), a wholly owned subsidiary of UCS, provided outsourced product development

and associated services to Argility in terms of the Outsourced Product Development (‘OPD’) agreement concluded in August 2007 and

amended in October 2008.

In accordance with the OPD agreement between the parties, UCSSM earned a royalty fee on all licences sold by Argility for the product

lines defined. Total fees paid to UCSSM in respect of development services to June 2010 prior to the UCS acquisition of Argility, including

royalty fees amounts to R6,1 million (2009: R11,1 million).

39.4 UCS has received R0,5 million (2009: R2,4 million) from Argility for the provision of outsourced financial management services to Argility

during the period to June 2010 prior to the UCS acquisition of Argility.

39.5 UCS Business Support Services (Proprietary) Limited, a subsidiary company of UCS, received R0,3 million (2009: R0,1 million) from Argility

for finance and administration services provided to Argility during the period to June 2010 prior to the UCS acquisition of Argility.

39.6 Ultisales Retail Software (Proprietary) Limited (‘Ultisales’) earned commission on the sale of Argility software products. The total reseller

commission earned during the period, prior to the UCS acquisition of Argility, amounts to R1,9 million (2009: R1,3 million).

39.7 In the prior year, Ultisales provided services to Comprehensive Retail Software (Proprietary) Limited, a company associated with a former

director of Ultisales, Mr S Fisher, to the value of R0,2 million. An amount of R0,2 million was owing to Ultisales at the 2009 financial

year end.

39.8 In the prior year, Ultisales has provided to and received services from BlackGinger 239 (Proprietary) Limited, a company associated with

a former director of Ultisales, Mr S Fisher. Services provided amounted to R0,1 million and services received amounted to R0,2 million.



39 RELATED PARTY TRANSACTIONS continued

39.9 Certain properties used by UCS Technology Services (Proprietary) Limited (‘UCS Technology’) are leased from Kings Enterprises Close

Corporation, 216 Cape Road Close Corporation, Clear Mandate Properties Close Corporation and Fastrack Trading Close Corporation.

Certain employees in UCS Technology own an interest in all of the above mentioned corporations. Total lease rentals to the corporations for

the year amounts to R2,8 million (2009: R3,5 million).

39.10 CEB Maintenance Africa (Proprietary) Limited (‘CEB’) leases its Johannesburg head office premises from Oberhurst Properties (Proprietary)

Limited in which a director of CEB, Desmond Poulter has a direct interest. The total lease rentals paid to Oberhurst Properties for the year

amounts to R2,4 million (2009: R2,2 million).

39.11 GAAP Point of Sale (Proprietary) Limited (‘GAAP’) leases its Johannesburg offices from Robfair Investments 354 Close Corporation. Jean-

Paul D’abbadie, a director of GAAP as well as certain employees of GAAP own an interest in the Corporation. The total lease rentals paid

to Robfair Investments 354 Close Corporation for the year amounts to R0,7 million (2009: R0,5 million).

39.12 GAAP entered into consulting arrangements with a company associated with Mr Phillip D’abbadie, a director of GAAP, for taxation and

accounting advisory and consulting services. A total of R0,6 million (2009: 0,5 million) was paid for these services which are considered to

be at arm’s length taking cognisance of market related circumstances.

39.13 UCS Solutions entered into sales transactions with Argility to the value of R0,1 million during the period to June 2010 prior to the UCS

acquisition of Argility (2009: R0,2 million).

39.14 UCS Solutions received services from Tactical Software Systems (Proprietary) Limited (‘TSS’) to the value of R0,7 million (2009: R0,9 million)

during the financial year.

39.15 Group companies have donated funds and advanced loans to Zwelethu Recruitments Solutions Close Corporation in terms of the Group’s

corporate social investment and enterprise development responsibilities. Funds advanced during the year and owing to UCS Group

companies amount to R1,4 million (2009: R1,0 million) at the financial year end.

39.16 UCS Mobiliti received services from Auto ID Marketing & Consulting CC, a Corporation represented by a director of UCS Mobiliti, Mr Carlos

Ferraz, amounting to R1 million during the year.

40 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying the entity’s accounting policies

In the process of applying the Group’s accounting policies, which are described in note 1, management has not made any critical

judgements that have a significant effect on the amounts recognised in the financial statements (apart from those involving estimations,

which are dealt with below).

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant

risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been

allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit

and a suitable discount rate in order to calculate the present value of the future cash flows. The carrying amount of goodwill at the balance

sheet date was R239 million (2009: R238 million). In the current year, no impairment of goodwill and intangible assets were recognised

(2009: R8 million)

Useful lives and residual values of tangible and intangible assets

The estimates of useful lives of tangible and intangible assets as translated into depreciation and amortisation rates are detailed in the

Group’s accounting policies, described in note 1 of the financial statements. These rates and residual values of the assets are reviewed

annually taking cognisance of the forecast commercial and economic realities and through benchmarking of accounting treatments in the

industry.

Valuation of equity-settled employee benefit payments

Management classifies its employee benefit payment schemes as equity-settled schemes based on the assessment of its role and that of

the employee scheme members. In applying its judgement, management consulted with expert advisors to value the equity-settled

employee benefit schemes using appropriate models that comply with IFRS 2: Share Based Payment. The model and inputs applied are

more fully described in note 22 to the financial statements. These include estimated option exercise behaviour as well as anticipated

forfeiture rates.

Capitalisation of development costs

Development costs are capitalised according to the Group’s accounting policy detailed in note 1 to the financial statements.


Group

2010

Restated

2009

R’000 R’000

41 SEGMENTAL INFORMATION FROM CONTINUING OPERATIONS

Business segment

Revenue 1 321 070 1 232 019

Retail Solutions 765 871 691 138

Software 181 589 203 281


Corporate 1 725 2 509

Profit from operations before interest, amortisation, depreciation, impairments

and foreign exchange differences (‘EBITDA’) 186 853 163 480


Software 17 544 28 273


Corporate and consolidation adjustments (14 060) (9 650)

Normalised profit before interest and taxation 115 031 94 354


Software 3 651 17 036


Corporate and consolidation adjustments (14 977) (11 006)

Depreciation and amortisation 71 822 69 126


Software 13 893 11 237


Corporate and consolidation adjustments 917 1 356

Research and development expenditure 14 801 7 278

Retail Solutions 3 802 –

Software 1 931 1 054


Assets 933 155 979 314



Software 177 346 49 063

Corporate and consolidation adjustments 41 375 58 097

Asset classified as held for sale – relating to prior year disposals – 109 222

Asset classified as held for sale – relating to current year disposal – 5 602

Liabilities 419 343 481 675



Software 76 639 8 278

Corporate and consolidation adjustments 18 312 8 207

Liabilities directly associated with assets classified as held for sale – relating to prior year disposals – 35 209

Liabilities directly associated with assets classified as held for sale – relating to current year disposal – 2 261

The geographical spread of the Group’s business operations does not warrant a secondary report by region.

Note: Comparative figures have been reclassified, where necessary, in accordance with current year classifications. In the current year, following the acquisition of Argility (Proprietary) Limited, businesses comprising the Software Division were reclassified from the Retail Solutions Division into the Software Division together with Argility (Proprietary) Limited.


SCHEDULE OF INTERESTS IN SUBSIDIARY COMPANIES for the year ended 30 September 2010

Issued

share

capital Effective holding Shares at cost

2010 2010 2009 2010 2009

R % % R’000 R’000

DIRECT HOLDINGS4Life Program (Proprietary) Limited 100 51 51 1 398 1 398

Accsys (Proprietary) Limited 100 100 100 1 1

Argility (Proprietary) Limited 283 840 100 – 44 228 –

Computerkit Holdings (Proprietary) Limited 1 000 100 100 18 606 18 606

Cquential Solutions (Proprietary) Limited 392 56 – 8 116 –

UCS Dynamics Software Solutions (Proprietary) Limited 100 70 100 * *

Fernridge Consulting (Proprietary) Limited 1 000 51 51 1 172 1 172

GAAP Point-of-Sale (Proprietary) Limited 100 61 61 * *

Innervation Value Added Services (Proprietary) Limited

(Previously Lifeworld Group (Proprietary) Limited) 100 100 51 1 646 1 646

UCS Brands (Proprietary) Limited 1 100 100 * *

Ultisales Retail Software (Proprietary) Limited 200 100 100 760 760

Universal Knowledge Software (Proprietary) Limited 100 76 76 793 793

UCS Software (Proprietary) Limited 300 100 100 1 200 1 200

UCS Business Support Services (Proprietary) Limited 100 100 100 7 800 7 800

Zethel Property and Investments (Proprietary) Limited

(‘UCS Mobiliti’) 100 80 – * –

UCS Software Manufacturing (Proprietary) Limited 100 100 100 * *

UCS Solutions Holdings (Proprietary) Limited 133 746 100 100 113 055 113 707

UCS Technology Services (Proprietary) Limited 100 100 100 * *

Universal Computer Software UK Limited 100 100 100 * *

V&A Risk Management (Proprietary) Limited 100 51 – 1 000 –

WiWallet Mobile Payments (Proprietary) Limited 409 51 – 3 528 –

203 303 147 083

Amounts due by subsidiary companies 125 842 116 402

4Life Program (Proprietary) Limited 950 950

Argility (Proprietary) Limited 5 450 –

CEB Maintenance Africa (Proprietary) Limited 580 580

Cquential Solutions (Proprietary) Limited 15 421 –

GAAP Point-of-Sale (Proprietary) Limited – 6 958

Innervation Value Added Services (Proprietary) Limited

(Previously Lifeworld Group (Proprietary) Limited) 366 4 074

UCS Brands (Proprietary) Limited 8 390 8 599

UCS Business Support Services (Proprietary) Limited 3 835 1 811

Zethel Property and Investments (Proprietary) Limited (‘UCS Mobiliti’) 1 159 –

UCS Software Manufacturing (Proprietary) Limited 800 33 136

UCS Technology Services (Proprietary) Limited 8 104 –

Ultisales Retail Software (Proprietary) Limited 62 1 965

Universal Computer Software UK Limited 77 933 58 329

WiWallet Mobile Payments (Proprietary) Limited 2 792 –

Less: Impairment of investments and amounts due by subsidiary companies 80 639 35 021

248 506 228 464

* Less than R100.

2010 2009

R’000 R’000

Aggregate investment revenues from subsidiaries comprise the following:

Interest received 6 586 6 375

Dividends received 26 226 12 598

32 812 18 973


INDIRECT HOLDINGS

Incorporated in South Africa – 100% held by UCS Group Limited wholly owned subsidiaries

Affinity Logic Management Services (Proprietary) Limited

CEB Maintenance Africa (Proprietary) Limited

Easirun Software II (Proprietary) Limited

Quadrant Consulting (Proprietary) Limited

UCS Solutions (Proprietary) Limited

Incorporated in South Africa – 70% held by UCS Group Limited wholly owned subsidiaries

Destiny Electronic Commerce (Proprietary) Limited

Incorporated in UK – 100% held by UCS Group Limited wholly owned subsidiary company

Aquitec UK Limited

Argility UK Limited


Number

of

shareholders %

Number

of

shares %

ANALYSIS OF SHAREHOLDING

Range

1 – 10 0000 682 62,34 2 549 559 0,88

10 001 – 100 000 263 24,04 9 419 064 3,27

100 001 – 500 000 82 7,50 20 387 740 7,07

500 001 – 1 000 000 22 2,01 14 661 346 5,08

1 000 001 and more 45 4,11 241 404 949 83,70

Total 1 094 100,00 288 422 658 100,00

DISTRIBUTION OF SHAREHOLDERSBanks 7 0,64 35 806 453 12,41

Close Corporations 29 2,65 712 250 0,25

Directors 15 1,37 80 123 649 27,78

Individuals 834 76,23 33 144 036 11,49

Investment companies 3 0,27 41 473 189 14,38

Mutual funds 50 4,57 53 998 324 18,72

Nominees and trusts 72 6,58 24 434 187 8,47

Other corporate bodies 28 2,56 2 586 466 0,90

Pension funds 25 2,29 2 917 309 1,01

Private companies 26 2,38 6 973 232 2,42

Share trust/company 5 0,46 6 253 563 2,17

Total 1 094 100,00 288 422 658 100,00

SHAREHOLDER SPREADNon-public 21 1,92 120 235 218 41,69

Directors 15 1,38 80 123 649 27,78

Company 2 0,18 3 484 095 1,21

10% + 1 0,09 33 858 006 11,74

Staff share trust 3 0,27 2 769 468 0,96

Public 1 073 98,08 168 187 440 58,31

Total 1 094 100,00 288 422 658 100,00

BENEFICIAL SHAREHOLDERS OWNING 5% OR MOREJD Bright 45 950 976 15,93

DF Coles 34 715 000 12,04

Rand Merchant Bank 33 858 006 11,74

Oasis Funds 30 892 569 10,71

Tactical Software Systems (Proprietary) Limited 27 011 196 9,37

SHAREHOLDER ANALYSIS for the year ended 30 September 2010

NOTICE OF ANNUAL GENERAL MEETING 101

Notice is hereby given that the Annual General Meeting of members of

UCS Group Limited will be held on the 20th floor, 209 Smit Street,

Braamfontein, Johannesburg on Friday, 28 January 2011 at 10h00 for

the purposes of considering and, if deemed fit, passing with or without

modification, the resolutions set out below:

1. ORDINARY RESOLUTION NUMBER ONE:

(AUDITOR’S REPORT)

To resolve that the Auditor’s Report be taken as read.

2. ORDINARY RESOLUTION NUMBER TWO:

(ADOPTION OF ANNUAL FINANCIAL STATEMENTS)

To consider the Annual Financial Statements of the Company

and the Group for the financial year ended 30 September 2010,

together with the reports of the directors and auditors.

3. ORDINARY RESOLUTION NUMBER THREE:

(RE-ELECTION OF MS V CHETTY)

To re-appoint Ms V Chetty, who retires by rotation but, being

eligible, offers herself for re-appointment.

4. ORDINARY RESOLUTION NUMBER FOUR:

(RE-ELECTION OF MR DF COLES)

To re-appoint Mr DF Coles, who retires by rotation but, being

eligible, offers himself for re-appointment.

5. ORDINARY RESOLUTION NUMBER FIVE:

(RE-ELECTION OF MR RG GOODMAN)

To re-appoint Mr RG Goodman, who retires by rotation but,

being eligible, offers himself for re-appointment.

6. ORDINARY RESOLUTION NUMBER SIX:

(RE-ELECTION OF MR NA MICHELSON)

To re-appoint Mr NA Michelson, who retires by rotation but,

being eligible, offers himself for re-appointment.

Summarised curriculum vitae of the directors who offer

themselves for re-appointment are as follows:

Ms V Chetty

A leading competition lawyer in her field who advises local and

foreign corporations on competition issues. Vani obtained her

undergraduate BA law (1990) and LLB (1992) degrees in

South Africa and then completed a Masters Degree in Law at

Georgetown University in Washington DC in 1996.

Mr DF Coles

Together with John Bright, Duncan is a principal founder of

UCS. He started his career in computing in 1967 and entered

the computer bureau field in 1970 at Management Computer

Services (Proprietary) Limited where he was employed as a

software developer/systems analyst and later promoted to the

position of General Manager. In 1975, following the merger of

the MCS and NCR computer bureaus he became an assistant

to John Bright where his responsibilities were concentrated

mainly on software development and software developer’s

management. Post the establishment of UCS and the

subsequent buy-out of the computer bureau from NCR in 1978,

Duncan’s major responsibilities have been in respect of the day-

to-day management of the computer operations and production

control areas within Argility (Proprietary) Limited where, in

addition, he plays an executive role and is responsible for the

Software Services Ceres division. Duncan has served as an

executive Director on the board since the listing of the UCS

Group in 1998 and is currently the Group Chairman.

Mr RG Goodman

An eminent practising advocate of the Cape Bar and of the High

Court of South Africa. A graduate of the University of Stellenbosch

(BA Law, 1978 and LLB, 1980), Mr Goodman went on to study

at the University of Cambridge where he completed his LLM

in 1982.

Mr NA Michelson

Neil completed his Bachelor of Accountancy in 1983, and wrote

and passed the Board exam in 1984. He ran numerous small

enterprises and consulted from 1985 – 1988 when he joined

Spartan Computers in 1988 as Financial Director until 1995

when he sold the business as Managing Director. Neil joined the

UCS Group Board in 1998 as Financial Director (‘FD’). After

numerous acquisitions, the Group identified the need for

splitting the role of Group FD and Group Chief Operating Officer

(‘COO’) and Neil was appointed as Group COO in 2002. Up to

September 2007 Neil also fulfilled the role of Chief Executive

Officer of UCS Software (Proprietary) Limited.

7. ORDINARY RESOLUTION NUMBER SEVEN:

(REMUNERATION OF NON-EXECUTIVE DIRECTORS)

To fix the remuneration for the non-executive directors, with

retrospective effect from 1 October 2010, as follows:

Chairman

(Rands)

Other

directors/

members

(Rands)

Board and Strategy meetings:

Attendance fee 33 920 25 440

Audit Committee:


Remuneration Committee:


8. ORDINARY RESOLUTION NUMBER EIGHT

(RE-APPOINTMENT OF AUDITORS)

The Audit and Risk Committee having been satisfied as to their

independence to re-appoint Deloitte & Touche as the auditors of

the Company.

Audit Fees

In terms of section 270A of the Companies Act, the Audit

Committee is responsible for determining the audit fees and the

auditors’ terms of appointment.

9. ORDINARY RESOLUTION NUMBER NINE

(PLACING THE UNISSUED SHARES UNDER THE CONTROL OF

DIRECTORS)

To resolve that, subject to the provisions of the Companies Act,

1973 (Act 61 of 1973), as amended, the Articles of Association

of the Company and the Listings Requirements of the JSE

Limited, the authority given to the directors to allot and issue, at

their discretion, the unissued share capital of the Company for

such purposes as they may determine, be extended until the

Company’s next Annual General Meeting provided that such

authority be limited to the allotment and issue, in any one

financial year, of 15% (fifteen percent) of the Company’s issued

share capital at the time that this authority is given.

NOTICE OF ANNUAL GENERAL MEETING for the year ended 30 September 2010


10. ORDINARY RESOLUTION NUMBER TEN

(CASH ISSUE)

To resolve that, subject to the provisions of the Companies Act

1973 (Act 61 of 1973), as amended, the Articles of Association

and the Listings Requirements of JSE Limited, the directors of

the Company be and they are hereby authorised, by way of a

general authority, to issue all or any of the authorised but

unissued shares in the capital of the Company for cash, as and

when they in their discretion deem fit.

The Listings Requirements of JSE Limited currently provide:

that this authority shall be valid until the next annual general

meeting of the Company, provided it shall not extend beyond

15 (fifteen) months from the date that this authority is given;

that a paid press announcement giving full details, including

the impact on net asset value and earnings per share, will be

published at the time of any issue of shares representing, on

a cumulative basis within one year, 5% (five percent) or more

of the number of the Company’s shares in issue prior to any

such issue;

that issues in the aggregate in any one year shall not exceed

15% (fifteen percent) of the number of shares in the

Company’s issued share capital;

that, in determining the price at which an issue of shares may

be made in terms of this authority, the maximum discount

permitted will be 10% (ten percent) of the weighted average

traded price determined over the 30 (thirty) business days

prior to the date that the price of the issue is determined or

agreed by the directors;

that the securities be of a class already in issue;

that any such issue will only be made to public members, as

defined by JSE Limited.

11. ORDINARY RESOLUTION NUMBER ELEVEN:

(AUTHORITY TO MAKE GENERAL PAYMENT TO

SECURITY HOLDERS)

To resolve that, as contemplated in section 90 of the Companies

Act, the board of directors of the Company shall be entitled

to pay an amount by way of a general payment from the

Company’s share capital or share premium, subject to the

provisions of the Companies Act, the JSE Listings Requirements

and the following limitations:

that this authority shall not extend beyond 15 (fifteen) months

from the date of this meeting or the date of the next Annual

General Meeting, whichever is the earlier date;

may not exceed 20% (twenty percent) of the Company’s

current issued share capital, including reserves but excluding

minority interests and revaluations of assets and intangible

assets that are not supported by a valuation by an independent

expert acceptable to the JSE prepared within the last

6 (six) months, in any one financial year, measured as at the

beginning of such financial year; and

that any general payment be made pro rata to all shareholders.

The Company’s directors undertake that they will not implement

the proposed general payment, unless the following conditions

are met:

the Company and the Group are able to repay their debts in

the ordinary course of business for a period of 12 (twelve)

months following the date of the general payment;

the assets of the Company and the Group, fairly valued

according to International Financial Reporting Standards

and on a basis consistent with the last financial year of the

Company, will be in excess of the liabilities of the Company

and the Group for a period of 12 (twelve) months after the

date of the general payment;

the Company and the Group have adequate share capital

and reserves for ordinary business purposes for a period of

12 (twelve) months after the date of the general payment;

the working capital of the Company and the Group will be

adequate for ordinary business purposes for a period of

12 (twelve) months after the date of the general payment;

upon entering the market to proceed with the general payment

the Company’s Sponsor has confirmed the adequacy of the

Company’s and the Group’s working capital for the purposes

of undertaking a general payment, in writing to the JSE;

the directors of the Company intend to utilise the authority in

terms of this Ordinary Resolution Number 11 in order to make

payment to shareholders, in lieu of dividend, by way of a

general payment from the Company’s share capital or share

premium; and

announcements will be published on SENS and in the press

setting out the financial effects of the general payment prior

to such payment being effected and complying with Section

11.31 and Schedule 24 of the JSE Listings Requirements.

12. SPECIAL RESOLUTION NUMBER ONE:

(AUTHORITY TO PURCHASE SECURITIES)

To resolve that, as a general approval contemplated in sections

85 to 89 of the Act, the acquisitions by the Company, and/or any

subsidiary of the Company, from time to time of the issued

ordinary shares of the Company, upon such terms and conditions

and in such amounts as the directors of the Company may from

time to time determine, but subject to the Articles of Association

of the Company, the provisions of the Act and the JSE Listings

Requirements, when applicable, and provided that:

the acquisitions of ordinary shares in the aggregate in any one

financial year do not exceed 20% (twenty per cent) of the

Company’s issued ordinary share capital from the date of the

grant of this general authority;

the general repurchase of securities will be effected through

the order book operated by the JSE trading system and done

without any prior understanding or arrangement between the

Company and the counter party (reported trades are prohibited);

this general authority shall only be valid until the Company’s

next Annual General Meeting, provided that it shall not extend

beyond 15 (fifteen) months from the date of passing of this

special resolution.

NOTICE OF ANNUAL GENERAL MEETING for the year ended 30 September 2010 continued

NOTICE OF ANNUAL GENERAL MEETING 103

In terms of the Listings Requirements of JSE Limited, the

following disclosures are required with reference to the general

authorities to repurchase the Company’s shares and to make

general payment as set out in special resolution one and

ordinary resolution eleven respectively, some of which are set

out elsewhere in the Annual Report of which this notice forms

part (‘this Annual Report’):

Details of Directors and Management – refer page 10 and 11.

Major shareholders – refer page 100.

Directors’ Interest in the Company’s securities – refer page 56.

Share capital – refer page 73.

Statement of Board’s intention

The directors of the Company have no specific intention to

effect the provisions of special resolution number one but will

however continually review the Company’s position, having

regard to the prevailing circumstances and market conditions in

considering whether to effect provisions of special resolution

number one.

Reason and effect

The reason for and effect of special resolution one is to

authorise the Company and/or a subsidiary Company by way of

a general authority to acquire its own issued shares on such

terms, conditions and in such amounts as determined from

time to time by the directors of the Company subject to the

limitations set out above.

PLEASE NOTE:

A. Ordinary resolution number 10 requires approval by a majority

of 75% (seventy five percent) of the votes cast by members

present or represented at the Annual General Meeting.

B. A member entitled to attend and vote is entitled to appoint a

proxy to attend, speak and vote in his stead, and such proxy

need not also be a member of the Company.

C. Forms of proxy should be lodged with the Company at its

registered office or with Link Registrars, 11 Diagonal Street,

Johannesburg, not less than 48 hours before the time appointed

for the holding of the Annual General Meeting.

By order of the Board

Corporate Governance Cc


Company Secretary to UCS Group Limited

21 December 2010

general repurchases may not be made at a price greater than

10% (ten percent) above the weighted average of the market

value for the securities for the 5 (five) business days

immediately preceding the date on which the transaction is

effected. The JSE should be consulted for a ruling if the

applicant’s securities have not traded in such 5 (five) day

business day period;

at any point in time, a Company may only appoint one agent

to effect any repurchases on the Company’s behalf;

after such repurchase the Company will still comply with the

JSE Listings Requirements concerning shareholder spread

requirements;

the Company or its subsidiary may not repurchase securities

during a prohibited period as defined in the JSE Listings

Requirements unless they have in place a repurchase

programme where the dates and quantities of securities to be

traded during the relevant period are fixed (not subject to any

variation) and full details of the programme have been

disclosed in an announcement over SENS prior to the

commencement of the prohibited period; and

when the Company has cumulatively repurchased 3% (three

percent) of the initial number of the relevant class of securities,

and for each 3% (three percent) aggregate of the initial

number of that class acquired thereafter, an announcement

will be made.

The directors undertake that they will not effect a general

repurchase of shares and/or make a general payment as

contemplated above unless the following can be met:

the Company and the Group are in a position to repay their

debt in the ordinary course of business for a period of

12 (twelve) months after the date of the general repurchase.

the assets of the Company and the Group, being fairly valued

in accordance with International Financial Reporting Standards,

are in excess of the liabilities of the Company and the Group

for a period of 12 (twelve) months after the date of the

general repurchase.

the share capital and reserves of the Company and the Group

are adequate for the next 12 (twelve) months following the

date of the general repurchase.

the available working capital of the Company and the Group

will be adequate for ordinary business purposes for a period

of 12 (twelve) months after the date of the general repurchase;

the share capital and reserves of the Company and the Group

are adequate for the next 12 (twelve) months following the

date of the general repurchase.

the available working capital of the Company and the Group

will be adequate for ordinary business purposes for a

period of 12 (twelve) months after the date of the general

repurchase; and

before entering the market to proceed with the general

repurchase, the Company’s Sponsor has confirmed the

adequacy of the Company’s and the Group’s working capital

in writing to the JSE.


CORPORATE INFORMATION

Registered office:

20th floor, 209 Smit Street, Braamfontein, Johannesburg.

Directors:

DF Coles (Chairman), JD Bright (CEO), JR Claassen (Non-executive),

V Chetty (Non-executive), JP Fortuin (Executive), RG Goodman (Non-executive),

BP Hattingh (Non-executive), NA Michelson (Executive), MPR Morojele (Non-executive),

DC Sparrow (Executive), P Terblanche (Non-executive)

Auditors:

Deloitte & Touche

Deloitte Place

The Woodlands

20 Woodlands Drive

Woodmead

2199

Sponsor:

Barnard Jacobs Mellet Corporate Finance (Proprietary) Limited

Ground floor, 24 Fricker Road

Illovo Corner

Illovo

PO Box 62200

Marshalltown

2107

Company Secretary:


Chartered Secretaries:

6 Dale Lace Glades

Eastwood Street

Randpark Ridge

PO Box 279

Randpark Ridge

2156

Bankers:

Nedbank Limited

Form oF proxy

UCS GROUP LIMITEDRegistration number 1993/002253/06(‘UCS’ or ‘the Company’)ISIN: ZAE 00016150Share code: UCS

For the use of members who hold certificated shares and members who have dematerialised their shares in ‘own name’ registrations.

For the Annual General Meeting to be held on Friday, 28 January 2011 at 10h00.

I/We

of

being a member/members of UCS and entitled to votes, do hereby appoint

or, failing him/her

or, failing him/her

The Chairman of the meeting as my/our proxy to act for me/us on me/us at the Annual General Meeting of the company to be held on Friday, 28 January 2011 at 10h00, and at any adjournment thereof, in the Boardroom, 20th floor, 209 Smit Street, Braamfontein, Johannesburg, and to vote for me/us on my/our behalf in respect of the undermentioned resolutions in accordance with the following instructions (see note 2).

Number of votes (one vote per share)

For Against Abstain

1. Ordinary Resolution Number One: (Auditor’s Report)

2. Ordinary Resolution Number Two: (Adoption of Annual Financial Statements)

3. Ordinary Resolution Number Three:(Re-election of Director: MS V CHETTY)

4. Ordinary Resolution Number Four:(Re-election of Director: MR DF COLES)

5. Ordinary Resolution Number Five:(Re-election of Director: MR RG GOODMAN)

6. Ordinary Resolution Number Six: (Re-election of Director: MR NA MICHELSON)

7. Ordinary Resolution Number Seven:(Remuneration of Non-Executive Directors)

8. Ordinary Resolution Number Eight:(Re-appointment of Auditors)

9. Ordinary Resolution Number Nine:(Placing the unissued shares under the control of directors)

10. Ordinary Resolution Number Ten:(Cash Issue)

11. Ordinary Resolution Number Eleven:(Authority to make general payment to security holders.)

12. Special Resolution Number One:(Authority to purchase securities)

Signed at on 2011

Signature Assisted by me

(where applicable – see note 7)

A member qualified to attend and vote at the meeting is entitled to appoint a person to attend, speak and vote in his stead. A proxyholder need not be a member of the Company.

UCS ANNUAL REPORT 2010

Form oF proxy notes

members holding certificated shares or dematerialised shares registered in their own name.

1. Only members who hold certificated shares and members who have dematerialised their shares in ‘own name’ registrations may make use of this proxy form.

2. Each such ordinary member is entitled to appoint one or more proxyholders (none of whom needs to be a member of the Company) to attend, speak and, on a poll, vote in place of that member at the general meeting, by inserting the name of a proxy or the names of two alternate proxies of the ordinary member’s choice in the space provided, with or without deleting ‘the chairman of the meeting’. The person whose name stands first on the form of proxy and who is present at the meeting will be entitled to act as proxy to the exclusion of those whose names follow.

3. A member’s instructions to the proxyholder must be indicated by the insertion of the relevant number of votes exercisable by that member in the appropriate box/es provided. Failure to comply with the above will be deemed to authorise the chairman of the meeting, if he is the authorised proxyholder, to vote in favour of the resolutions at the general meeting, or any other proxy to vote or to abstain from voting at the general meeting, as he deems fit, in respect of all the member’s votes.

4. A member or his or her proxy is not obliged to vote in respect of all the shares held or represented, but the total number of votes for or against the resolutions in respect of which any abstention is recorded may not exceed the total number of votes to which the ordinary member or his proxy is entitled.

5. Any power of attorney and any instrument appointing a proxy or other authority (if any) under which it is signed, or a notarially certified copy of such power of attorney shall be deposited at the office of the transfer secretaries not less than 48 (forty eight) hours (excluding Saturday, Sundays and public holidays) before the time appointed for holding the meeting.

6. The completion and lodging of this form of proxy will not preclude the relevant member from attending the meeting and speaking and voting in person thereat to the exclusion of any proxyholder appointed.

7. Where there are joint holders of ordinary shares any one holder may sign the proxy form. The vote of only one holder in order of seniority (determined by sequence of names on the company register) will be accepted, whether in person or by proxy, to the exclusion of the vote(s) of other joint holders.

8. Members should lodge or post their completed proxy forms to Link Market Services (Pty) Limited, 11 Diagonal Street, Johannesburg (PO Box 4844, Johannesburg, 2000) by not later than 48 hours before the meeting. Proxies not deposited timeously shall be treated as invalid.

members holding dematerialised shares

9. Members who have dematerialised their shares through a Central Securities Depository Participant (CSDP) or broker (except those members who have elected to dematerialise their shares in ‘own name’ registrations) and all beneficial members holding their shares (dematerialised or certificated) through a nominee should provide such CSDP, broker or nominee with their voting instructions in sufficient time to allow them to advise the transfer secretaries of the company of their voting instructions before the closing time set out in note 8 above.

10. All such members wishing to attend the meeting in person may do so only by requesting their CSDP, broker or nominee to issue the member with a letter of representation in terms of the custody agreement. Such letter of representation must also be lodged with the transfer secretaries before the closing time set out in note 8 above.

UCS ANNUAL REPORT 2010

INVESTMENTS DIVISION

RETAIL SOLUTIONS DIVISION

SOFTWARE DIVISION

UCS SOLUTIONS CEB Maintenance Africa

UCS TECHNOLOGYSERVICES

GAAP Point-of-Sale

ULTISALES Retail Software

CSC

INNERVATIONValue Added Services

UCS DYNAMICS Software Solutions

UCS MOBILITI

4LIFEProgram

ACCSYS FERNRIDGEConsulting

UKSUniversal Knowledge Software

wiWALLET Mobile Payments

V&A RISKVolume and Affi nity Risk Managemnt

ARGILITY AQUITEC CQUENTIALSolutions

UCS GROUP LIMITED

20TH FLOOR, 209 SMIT STREET

BRAAMFONTEIN, JOHANNESBURG

www.ucs.co.za

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2010 ANNUAL REPORT

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