UCS Group Limited The Retail IT Specialists

1
UCS Group LimitedThe Retail IT Specialists

• Small Cap IT Analysts Presentation
• Dean Sparrow CFO UCS Group
• 17 October 2006

2
Agenda

• Overview
• Solutions Services
• Software
• Group analysis- SWOT- Local growth - Cross
  selling
• BEE strategy
• Investment case
• Outlook
• Questions

3
The UCS Group (UCS)
UCS provides the widest range of IT software,
solutions and services to the retail and consumer
goods markets in Southern Africa. The Group is
well positioned for further growth locally and
internationally through a number of defined
initiatives.
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UCS Group - Structure
UCS Group
Solutions Services Division
Software Division
74.9
100
UCS Solutions Holdings
UCS Software
100
100
Accsys
CKS
66
61
UKS
GAAP
100
50.1
UCS Software Manufacturing
Fernridge
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Our Footprint

• More than 95 of SAs top retailers deal with UCS
• Our software is used in more than 15 000 stores
  country wide
• Our systems serve more than 20 million South
  African consumers per month
• Weve got 1000 technicians in our man-in-van
  support service nationwide

6
Retail spend analysis
Key POS Point of Sale SBO Store
Back Office IM- Inventory Management MO
Merchandise Optimization Merch Merchandising
Systems DW Data Warehouse WMS Warehouse
Management Systems OM Order Management Source
AMR, Gartner

• Note
• UCS Software largely focused on POS, SBO and OM
• UCS Solutions largely focused on remainder
• Further analysis included later

7
Financial History
Strongcashgeneration
Material growth andannuity
Focus onefficiency/profitability
gt20p/afor past3 years
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Segmental Contribution (interims 2006)
9
Our Track Record

• 18 acquisitions made to date, most recently
• 2006 TSS (TSSMS, Quartet, TSSBS)
• 2005 CEB Maintenance
• TSS acquisition concluded through UCS Solution
  Holdings equity issue and TSS also subscribed for
  2.8m (R5m) UCS Group shares for cash
• Acquisitions largely funded by cash resources.
  Acquisition payments to date R178.8m plus 22.1m
  UCS shares
• Executed to consolidate our position and
  re-engineered for annuity revenue streams
• Acquisitions have contributed to growth at a time
  of favorable valuations to build market dominance
• Have assembled an unrivalled product and service
  platform to drive meaningful cross-selling and
  optimisation of existing client relationships
  across the Group
• Note Currently there are 249 million shares in
  issue from an original 273 million on listing.

10
UCS Solutions and Services Division
11
UCS Solutions Services Division
H1 FY 2006
Composition

• CEB included for full period (man-in-van
  maintenance)
• All businesses traded well
• BEE deal announced between TSS and UCS Solutions
  Holdings
• Well represented across Tier 1 retail

Business and IT solutions provider for retail
supply chain

Retail sales optimisation services
Integrated Human Resources solutions
Library software solutions
Including CEB Maintenance, TSS Managed Services
Quadrant Consulting
12
Market Segmentation UCS Solutions
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Customers Solutions and Services
14
Market Sizing and Growth Prospects

• The market size for the services we deliver is
  estimated to be R3.6bn on external services and a
  further R3.6bn on internal services for the
  retail, wholesale and consumer goods
  manufacturing industries we estimate to have
  between 9 10 of the external spend market
  post the acquisition of CEB
• External spend is projected to grow at 13 over
  the next 3 years according to BMI
• Continued trend towards partial or full
  outsourcing in this market in line with
  international trends which will further expand
  the market opportunity
• Several tier 1 retailers now looking at and/or
  implementing leading package software
  applications and exploring selective outsourcing
  relationships
• Key partnerships SAP, JDA, IBM and Microsoft -
  reinforcing UCS Solutions go to market
  approach in both applications and infrastructure
  services
• Telecoms deregulation opening up opportunities
  for network services

15
UCS Software Division
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UCS Software Division
Composition
H1 FY 2006
Custom and packaged retail software services
solutions

• Annuity revenue grew by 18.1 to R100.9m
• Annuity revenue 68.5 of cash overheads
• CKS success in Building Supplies sector
  compensates for tough trading conditions in
  Pharmacy sector
• Research and Development expenditure focused on
  new product
• UCSSM launches Assemble-to-Order
• Software Manufacturing service

Restaurant software solutions
Pharmacy and hardware-store software solutions
Domain-specialised, outsourced product development
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Market Segmentation - Software
Software division industry segmentation 2005
our market opportunity

5
28
22
4
2
12
10
9
5
3
18
Customers Software
Hospitality and Quick Service Restaurants
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Software Division Business Strategy and
Competitive Advantages

• Strong industry vertical and geographical focus
• Develop in Rands and own the IP for all our
  retail software
• Synchronising product roadmaps and converging
  competitive products into single product over
  time
• Implementation support services wrapped around
  UCS software
• Aimed at all tiers of the Retail market (Direct
  Indirect)
• UCSSM capability positioned for large scale
  international solutions (attractive A20 assemble
  to order offering)

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Growth Strategy

• UCS Software being positioned to become a pure
  software services business (no application
  software product R D) and to become a
  significant channel partner to the pure
  software business
• Integration of the 6 merged Software units
  largely completed in September 05 currently
  delivering and will continue to deliver
  sustainable margin improvements
• UCS Software Industry verticals
• 2006 2003 2000 1997
• Furniture Furniture Furniture Furniture
• Apparel Apparel Apparel
• Pharmacy Pharmacy
• QSR QSR
• FMCG FMCG
• Speciality Speciality
• Forecourt Retail
• Mass Discounters
• Home Improvement

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Growth Strategy cont.

• Geographies
• 2006 2003 2000 1997
• RSA RSA RSA RSA
• Southern Africa Southern Africa Southern
  Africa
• Dubai Dubai
• UK
• Saudi Arabia
• International expansion key to enabling high
  growth rates
• Channel partners established in UK and Middle
  East region

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UCS Group
23
SWOT analysis

• Opportunities
• Cross selling products/services
• UK market first
• Other international markets
• New verticals
• New product line R D
• International alliances / partnerships
• Certified ERP interfaces

• Strengths
• Footprint in RSA
• Quality of reference base
• of Verticals
• Proprietary IP
• Modern technologies
• Annuity revenue model
• Rand based costs
• English speaking

• Threats
• Microsoft
• Other competitors
• Technology changes
• RSA skills shortage staff retention

• Weaknesses
• No international footprint
• RSA / Africa based
• Limited BEE opportunities
• Share price / market cap.

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Local growth opportunities

• Our Fernridge consulting business recently
  (August 2006) conducted a survey of an industry
  vertical within the retail market in Gauteng to
  reflect the market share that UCS Software in
  particular has in this industry vertical.
• We have mandated Fernridge to conduct a broader
  survey nationally.
• Over the following 5 slides it will become
  evident that the local growth opportunities
  remain attractive.
• We have the potential to significantly increase
  our store footprint in SA over the medium term.
• Our service stack is sufficiently broad across
  the Group to achieve this.
• We wish to optimise our existing relationships
  through cross-selling opportunities between our
  Software and Solutions Services divisions
• Ultimately we want to be a 1 Stop shop for all IT
  software, solutions and services to the retail
  sector.

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Demo
Physical location of a specific retailers
outlets in Gauteng
38 Outlets
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Demo
UCS has a market share of 39 among this specific
retailers outlets in Gauteng.
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Demo
Physical location of all national FMCG retail
outlets in Gauteng
794 Outlets
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Demo
UCS has a market share of 34 among national FMCG
retail in Gauteng.
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Demo
Kempton Park
UCS has 13 clients
UCS has a market share of 43 among national food
retailers in Kempton Park
Average monthly spent on POS in this area /
industry R13,427
Kempton Park available POS market for UCS
R228,259 / month
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Cross-selling opportunitiesAn illustration of
different products services available in the
two divisions

• Solutions and Services
• Tailored 3rd party software and Consulting
  solutions for better business performance
• Design, implementation and operation of leading
  applications, including UCS Software, SAP and JDA
• Broad portfolio of leveraged, managed
  infrastructure including POS and desktop services
  (Significantly positioned with CEB now enhanced
  with TSSMS)
• Professional IT service management capabilities
  underpinned by a 24 x 7 contact centre (1st and
  2nd line support)
• Retail store location and optimisation services

• Software
• large scale customised and package POS
  proprietary software
• Products specific to retail verticals
• Products for both Microsoft and Linux platforms
• CMMi Certified facility positioned for
  outsourced product development (OPD) or Assemble
  to Order (A20) opportunities In-store focus
• Implementation, maintenance, support and roadmap
  services
• Product specific and retail related training
  services
• 3rd line technical support

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BEE Strategy

• Fine-tuning of strategy taking place based on
  recently released final Code of Good Practice
  (DTI)
• Will incorporate new trust for existing and
  future staff
• Due to the diversity of businesses in the Group,
  UCSs strategy is to implement BEE deals at
  operating subsidiary level
• Roll-up into Group, if required by new BEE
  partners
• BEE deal done with UKS Subsidiary
• TSS transaction concluded for UCS Solutions
  Holdings providing BEE equity position for UCS
  Solutions and CEB
• Actively pursuing opportunities for the remainder
  of Group companies

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Overview of TSS BEE transaction
UCS Solutions Holdings
UCS Group
TSS 100 black owned
74.9
25.1
40
60
100
100
100
UCS Solutions
TSS Managed Services
Quadrant Consulting
CEB Maintenance

• TSS Business Services
• Quartet

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TSS transaction important factors

• Creates a material BEE player in IT services
  industry, with turnover of gtR550m annualised (for
  UCS Solutions Holdings)
• Strategic alignment between
• Business Solutions division and TSS Business
  Services/Quartet (gt150 SAP consultants)
• TSS MS and CEB Maintenance
• Anticipate new market opportunities as a
  consequence
• Entered into a three year management agreement
  regarding TSS MS
• Transaction became effective from 1 July 2006
• Pro-forma financial effects reflect transaction
  as earnings enhancing

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The Investment Case

• Worldwide trend against homegrown software and
  in-house services (evident in SA too)
• Secured strong local market position
• Consolidated a large part of the software market
• Strong annuity base of blue chip clients
• Ability to leverage current relationships cross
  sell products and services
• Significant growth potential in local market
• Strong organic growth and cash flow generation
• Ongoing margin improvement in base business
• Positioned for the international opportunities
• Product distribution channels in UK Middle East
• UCSSM delivery capability

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Outlook

• Exciting growth platform
• Software
• UCSSM - CMMi certification - A2O capabilities -
  international opportunities
• ActiveRetail - Converged packaged software range
• Building international channels to market
• Solutions Services
• Critical mass established
• BEE position secured
• Infrastructure and SAP consulting strengthened

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Forward Looking Statement
Various remarks that we may have madeabout
future expectations, plans and prospects for the
company constitute forward-looking
statements Actual results may differ
materiallyfrom those indicated by these forward
looking statementsas a result of various
important factors
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Questions
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Enquiries
UCS Group 011 712 1300Dean Sparrow, CFO 082 494
6803 dcs_at_jhb.ucs.co.zaCollege Hill 011 447
3030Johannes van Niekerk 082 921 9110
johannesv_at_collegehillir.com