Purchase pays off for Bytes

By Paul Vecchiatto for Bytes Technology Group
Cape Town, 05 Oct 2005

Bytes Technology Group (BTG) has swallowed the R100 million purchase of CS Holdings and an improved performance from its UK operations has allowed it to post improved profits in its interim results.

For the six months ended 31 August, the group says it experienced a 23% rise in revenue to R1.747 billion, of which 6% was based on organic growth and 17% on acquisitions. This translates into attributable earnings of R73 million, a R149 million reversal of the R76 million loss in the first six months of 2004. R130 million was due to the goodwill impairment charge made in the previous year.

The revenue stream from ICT infrastructure and services increased to R753 million from a previous restated R595 million; software, consulting and document services provided R613 million from a restated R567 million; and specialised equipment and services brought in R54 million from a restated R49 million a year ago. The 'corporate and other` category contributed R1 million.

Operating income improved by 35% to R128 million. Net finance charges increased from R8 million to R9 million due to a higher level of borrowings associated with the acquisitions. Headline earnings at 46.5c showed an improvement of 31% over the restated earnings of 35.4c a year ago.

The CS Holdings acquisition proved to be a double-edged sword, with several divisions being incorporated into BTG. Efficiencies were created by retrenching 300 people and a contribution of R12 million was made to profit.

However, the adoption of the International Financial Reporting Standards rules affected the way the long-term lease on CS Holdings` Midrand head office was accounted for, leaving the headline earnings 4.7c short of where they could have been.

BTG spent R143 million on acquisitions including the outstanding 61% of associate company Digital Healthcare Solutions, Altron`s share of a company that finances technology purchases, and a digital printing company in KwaZulu-Natal.

BTG CEO David Redshaw says he was pleased the acquired businesses from CS Holdings had performed to expectations.

"Our UK operations have also showed significant improvement and are once again contributing to the group`s bottom line," he says.

In mid-morning JSE trade today, BTG`s share price dipped 5c to R10.05 in light trade.