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Date Posted: 12/17/2001

Softline records 14% growth in revenue, and continues strong cash generation

 
 
20 Nov, 2001

Softline, the accounting and payroll software developer, has reported revenue growth of 14% to R232-million for the interim period ended 30 September 2001, (September 2000: R203-million).
Sustainable earnings per share, excluding exceptional items, for the period of 10.6c, was up from 9.8c in the second six months of last year, and down from the 18.5c reported in the comparable period.

Softline’s chief executive officer Ivan Epstein says “although the results are down on the comparable period last year, they do reflect an improvement on the previous six months of trading. The decisive action taken during the last few months of the prior year to close start-up operations, cut overheads and improve working capital allowed the group to emerge leaner and more focused”.

“A stronger set of results has been reported for the interim period compared to the second half of last year, despite being down on the comparable period The primary reasons for the weaker performance from the comparable period includes an increased expense base, the inclusion of AccountMate, a significantly higher tax rate and an increased number of shares in issue”.

“Taking these factors into account I am satisfied that the results indicate a positive upward recovery trend from the second half of last year. Operating profit, excluding exceptional items, has improved by 44% from R33-million in the second six months to R48-million, (R81-million in the comparable period), and the operating margin has increased from 15.9% to 20.6%”.

Attesting to the quality of earnings Softline generated R35-million in cash from operating activities in the period, constituting 74% of trading profit. The group’s cash position increased from R38-million at the year-end to R53-million, and operations continue to generate cash on a monthly basis.

The improvement in results over the prior six-month period is due to a stronger focus on operational performance and improved trading conditions following the post-Y2K slowdown experienced in the past fiscal year. No further acquisitions were completed in the period as the group focused on consolidating its position and working on the further integration of the BusinessVision and AccountMate acquisitions.

Operations in the USA, Canada and Australia contributed 42% of revenues and 50% of the group’s operating profit.

The component of revenues derived from maintenance and services experienced a pleasing improvement to 69%, from 58% in the comparable period. This improvement is attributed to the group’s ongoing concentration on growing its base of annuity income.

“Softline will continue its efforts on shifting the business model of all its operations towards a recurring revenue model as this provides the group with an increasingly sustainable, cash generative and predictable income stream,” comments Epstein.

Selling, general and administration (SG&A) expenses increased substantially from the comparable period, (from 33% to 58%), as a result of increased infrastructure costs relating to the recurring revenue model, as well as the inclusion of AccountMate (USA). AccountMate’s expense base has been increased as it added depth to its sales and marketing infrastructure, adding to overall group S,G&A expenses, impacting on operating margins. Operating margins in the comparable period were 39.9% compared to 15.6% in the second half of last year and 20.6% in the current interim period.

“AccountMate has proven, robust technology and is key to our strategy in entering the North American market,” comments Epstein. “The consolidation of vendors in the US accounting mid-market has provided AccountMate with an opportunity to capture a larger share of this market. We believe that an investment in a solid sales and marketing strategy will pay large dividends in the future.”

The large increase in the number of shares in issue impacted the sustainable earnings per share for Softline, which is reported at 10.6c. The number of shares in issued increased by 22 million from the comparable period last year, primarily as a result of acquisitions.

The group’s working capital position has also improved during the current reporting period and there continues to be no significant interest bearing debt.

R&D accounted for 8.4% of revenues and is considered essential in ensuring Softline’s continued competitiveness in the global software market.

Epstein comments that “despite tough market, as well as economic conditions, Softline has displayed an ability to weather the storm, and we continue to demonstrate our quality and adaptability to changing market conditions.”

 
 


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