Bytes Technology Group (BTG) reported a strong performance for the year ended February 29, with a 27 percent improvement in adjusted headline earnings per share, and an increase of more than 37 percent in its dividend declared of 22 cents per share.
Says CEO of BTG, David Redshaw: "It should be noted that the increase in net finance costs relating, inter alia, to the purchase of the remaining 50 percent shareholding in Bytes Document Solutions (Xerox Corp.), was more than offset by the reduced level of profits attributable to outside shareholders. Whilst the return to profitability of our U.K. operations was most welcome, much work remains to be done to raise profitability to acceptable levels.
"Abnormally high revenues from Microsoft (Corp.) licensing in the U.K. in the prior year, coupled with the impact of a much stronger rand, resulted in a year-on-year reduction in our group's revenues of 14 percent."
He said the group's operating profit rose by 11 percent to R185 million (US$19.5 million) and operating profit to revenue margin increased to 7.1 percent from 5.5 percent in line with management's focus on operating efficiencies. Net finance costs rose sharply to R25 million, from a negligible amount the previous year, due to higher borrowings emanating from acquisitions.
Redshaw said cash generated by operating activities increased to R196 million (R186 million) despite higher tax, dividend and interest payments. "Adjusted headline earnings per share rose by 27 percent to 67.9 cents (53.5 cents). If the effects of goodwill amortization of R134 million (R84 million) are eliminated, profits attributable to shareholders reduced slightly, to R97 million, from R111 million during the previous year.
"We have achieved significant operational efficiencies across a broad front during the year, with most operations realizing rationalization and synergistic savings. Although the segmental analysis reflects a significant deterioration in the performance from the U.K. operations due to extremely difficult trading conditions in that region, it is pleasing to note that these operations returned to profitability in the second half, a trend which has been continued subsequent to year-end. We also expect that the structural and organizational steps, which were undertaken to achieve additional efficiency savings, will assist in offsetting the unrelenting pressures on margins in the year ahead," says Redshaw.
He referred to the announcement on March 9 that the group has, subject to certain conditions, been successful in concluding an equity participation of 27 percent by the Kagiso group in its SA-based operations. "We are confident that Kagiso's involvement will contribute meaningfully to the group's progress during the coming years. BTG is also making progress in terms of its transformation initiatives, and we have, in conjunction with Altron, our holding company, set some firm targets and objectives, and are fully committed to achieving these over time," he says.
Looking ahead, Redshaw says that, given the issues which restricted profit growth during the first half of last year, a fundamental earnings improvement on a comparative basis is foreseen at the interim stage, and that this will enable the group to post a satisfactory earnings performance for the full year. Any initial dilution in earnings, resulting from the introduction of Kagiso as the black economic empowerment partner, is expected to be compensated for by the many opportunities which such a partner is expected to help to generate.
"We are not considering any material acquisitions, but are focusing on reducing the group's net interest-bearing debt of around R147 million. However, given our strong cash flows, we will examine any suitable opportunities which may be identified," Redshaw concludes.