UCS Group Limited

1
THERE IS MORE TO UCS THAN MEETS THE EYE

• UCS Group Limited
• Presentation of results and business overview
• for the period ended 31 March 2007
• Published on 15 May 2007

2
Agenda

• Welcome and Introduction John Bright
• Financial Review Dean Sparrow
• Operational Review Solutions Services
  Richard Newton
• Operational Review Software Neil Michelson
• Product Co John Bright
• BEE update Richard Newton
• Looking forward John Bright
• QA

3
Forward looking statements
Various remarks that we may make about future
expectations, plans and prospects for the company
constitute forward-looking statements Actual
results may differ materially from those
indicated by these forward looking statements as
a result of various important factors
4
The UCS Group (UCS)
UCS is an IT business with a primary focus on the
provision of Software, Solutions Services for
selected markets. UCS has achieved a leadership
position in the retail market sector in South
Africa and is well positioned for further growth
locally and internationally through a number of
defined initiatives. The major portion of UCSs
revenues are derived from the provision of its
own Software, Solutions Services, rather than
the sale of 3rd party products.
5
Group financial highlights

• Revenues up 44 to R511m (2006 R356m) organic
  growth 15
• Annuity revenues up 19 to R280m (2006 R235m)
• Normalised EBITDA up 58 to R84m (2006 R53m)
• Normalised EBITDA margin at 16.4 of revenues
  (2006 14.9)
• HEPS up 77 to 14.5c (2006 8.2c)
• Cash generated by operations up 71 to R86m
  (2006 R50m)
• Interim dividend declaration per share up 33 to
  4c (2006 3c)

6
5 year track record
Total Revenues
Annuity Revenues
HEPS (cents)
EBITDA
7
Financial reviewDean Sparrow
8
Income statement

• Normalised PBIT up 65.6 to R52.8m (2006 R31.9m)
  
• Normalised PBIT margin at 10.3 (2006 9.0)
• Significant increase in amortisation of
  intangible assets
• TSSMS Quadrant intangible assets arising at
  acquisition R8.6m
• ARMyE released to market by UCSSM October 2006
  R0.9m
• Investment in Products and intellectual property
• RD expenditure up at R14.9m (2006 R10.2m)
• Development costs capitalised down at R6.6m
  (2006 R8.6m)
• i.e. combined investment up 14.4 at R21.5m
  (2006 R18.8m)
• Profit on sale of the network business R8m
  included in PBIT reported
• Effective tax rate at 14.1 skewed partly due to
  zero tax impact on R8m profit on sale of the
  network business. Adjusted the rate would be
  16.3
• Difference between EPS and HEPS largely due to
  profit on sale of network business

9
Balance sheet

• Non-current assets R111m growth in goodwill
  driven by
• TSS roll-up transaction R76.4m
• 3J Holdings transaction R19.5m
• CEB upside payment R12.0m
• Other R3.2m
• Current assets
• Accounts receivable increased by 12 to R167m
  from 30 Sept 06 balance which included the TSSMS
  and Quadrant businesses
• Accounts receivable collection days maintained at
  50.8 days
• Current liabilities R34m increase in current
  portion of long term loans
• Full provision for likely upside payment re CEB
  R12m
• Cost of 3J Holdings acquisition at period end
  R21.8m (settlement through equity issue)

10
Balance sheet continued

• Current ratio 1.21 (2006 year end 1.41) after
  stripping out equity settled liability re 3J
  acquisition the ratio returns to 1.41
• Substantial equity growth (excl accumulated
  profit) based on equity settled transactions i.e.
  TSS roll up
• 24.2m shares at R4.30 R104.1m
• Reduction in Minority interest as a consequence
  of TSS roll up
• Total debt R97.3m (2006 R55.9m)
• Debt to equity ratio 21.2 (incl. Minority
  interest and deferred vendor pmts)
• True external bank debt R37.4m (2006 R32.2m)
• Debt to equity based on bank debt only is 8
  (equity incl. Minority interest)

11
Cash flow statement

• Cash generated by operations up 70.5 at R85.7m
  (2006 R50.3m) closely approximating normalised
  EBITDA (i.e. after stripping out profit on sale
  of network business) of R84m
• Increase in outflow in net working capital
  changes relates predominantly to the increase in
  the accounts receivables as discussed on Balance
  Sheet
• Cash applied to investing activities can be
  broken down as follows
• Capex (R22.2m) net of proceeds on disposal of
  P,PE
• Development costs capitalised (R6.6m)
• Transaction costs incurred (R1.5m)
• Lifeworld acquisition (R2m)
• Cash inflow on disposal of network business R12m
• Other R1m
• Cash utilised in financing activities
• Cash paid in settlement of CEB deferred vendor
  payment (R12m)
• Bank repayments (R5m)
• Consideration for shares issued R2.1m

12
Solutions and Services Division
Operational reviewRichard Newton
13
Current trading structure
14
Divisional financial highlights

• Revenue up 69.2 to R325m (2006 R192m)
• Organic component of revenue growth equates to
  16.7
• Once off profit of R8m realised on the sale of
  the network business to Internet Solutions
• Normalised EBITDA up 63.7 to R58m (2006 R35m)
  reflecting a 17.9 EBITDA margin (2006 18.4)
• Normalised PBIT up 52.3 to R40m (2006 R26m)
  reflecting a 12.3 PBIT margin (2006 13.6)
• Annuity revenue up 29 to R164m (2006 R126,7m
  adjusted for IS sale) and represents 50 of the
  divisions revenue
• Notes
• Caused by incremental R15m OEM revenue at
  lower margins
• Impacted by R8,6m intangible write offs. If
  excluded, PBIT is 15.0

15
Context for this division

• Did not exist in 2003
• Currently in a build phase. Components acquired
• UCS Solutions (Affinity Logic) Hosted
  outsourced services and consulting services for
  retail sector
• CEB - In-store (man-in-van) support
• TSS - SAP training and consulting (into UCS
  Solutions)
• - Distributed Infrastructure Solutions
• Fernridge - Value added retail consulting
• In process of building a Value-Added Services
  division focussed on transaction switching
  including banks, credit solutions, loyalty and
  other value added services
• Once components have been acquired (and
  contractual arrangements fulfilled) appropriate
  integration and synergies to be targetted.

16
Key operational features

• Successful project delivery
• Secured a number of annuity contracts from
  traditional consulting customers
• Pick n Pay
• Department of Justice
• 40 growth in annuity revenues from government
  services (TSSMS)
• Transition of UCS Solutions data centre and
  network to IS
• Selection of future business process and
  technology platform for infrastructure services
  business
• Accsys, UKS Fernridge continued to trade well
  in their respective sectors

17
Sample of customer projects delivered

• SAP projects for MassBuild (De la Rey), Pick n
  Pay (phase 2)
• 3 SAP All in One retail projects and first Mining
  project (PPC)
• Recent SAP partner service excellence award
• Training Solutions to City of Johannesburg
• Electronic funds transfer payments solution for
  Game/Dion, switching infrastructure for Clicks
• IT infrastructure deployment to 300 sites as part
  of e-justice deployment

18
Divisional market segmentation
19
Strategic partnership with Internet Solutions
20
IS partnership update

• Transaction effective 1 November 2006
• Almost finalised transition of UCS Solutions
  network
• Busy transitioning our Enterprise Server Hosting
  infrastructure into IS data centre
• Now starting business development initiatives

21
Outlook

• Investing in scaleable business process and
  technology platforms to support volume growth in
  infrastructure business
• Strong consulting/projects order book for the
  next 15 months
• Government market opportunity significant
  targeting a number of contracts
• Mid tier (SAP All in One) market prospects are
  encouraging
• Developing a number of new service lines, ie
• Retail process co-sourcing
• Retail workbenches

All in all, prospects for the remainder of this
year are positive
22
Software Division
Operational reviewNeil Michelson
23
Current trading structure
Software Division 2007 H1 Revenues R185m (2006
R163m)
UCS Group Limited
100
Custom and packaged software services solutions
for retail multiple verticals / all tiers
UCS Software
100
Custom and packaged software services
solutions for retail pharmacies hardware /
building supplies
CKS
100
Transaction switching services including bank
payments, medical-aid authorisations, electronic
voucher sales, gift registries, loyalty programs,
etc.
Destiny E-Commerce
Packaged software services solutions for
restaurants fast food outlets
61
GAAP
Retail domain-specialised, outsourced S/W product
development assemble-to-order retail S/W
application manufacture
100
UCS Software Manufacturing
24
Divisional financial highlights

• Revenue up 13.4 to R185m (2006 R163m)
• Annuity revenue of the division has grown by
  14.9 to R116m (2006 R101m) and equates to 63
  of total revenue (2006 62)
• EBITDA up 50.6 to R29.8m (2006 R19.8m)
  reflecting a 16.1 EBITDA margin (2006 12.1)
  after RD increase of R4.7m
• Depreciation and amortisation up 15.4 to R12.9m
  (2006 R11.1m)
• PBIT up 95.6 to R17.0m (2006 R8.7m) reflecting
  a 9.2 PBIT margin (2006 5.3)

25
Key operational features

• Rationalisation continues 7 businesses merged
  efficiencies extracted
• GAAP focus on hospitality strengthened
• Continued margin improvement
• Selective approach to new business opportunities
• Increased focus on higher margin components of
  the retail market
• UCSSM A2O offerings
• Improved Group alignment for customer focus
• business consulting,
• in-store software,
• enterprise / central solutions
• outsourcing
• Key talent attracted, skills development and
  retention strategies effective

26
UCS Software manufacturing update

• Strong market acceptance of the unique A2O
  software manufacturing service since its launch
  in October 2006
• The operational integration of Satyam Computer
  Services within the SDSP program gained strong
  momentum
• Sales and marketing initiatives being launched
  within the ME, APAC and INDIA regions after 7 man
  team from Satyam received training at UCSSM
  earlier this month 
• UCSSM and Satyam are also jointly engaged in
  setting up a dedicated A2O practice with the
  appropriate technical skills-profile in India.
• A second SA enterprise-scale retailer has
  completed a milestone zero project and has signed
  for a R10m A2O service
• UCSSM established industry-leading software
  production-economies and delivery standards in
  its first project for JD Group (Hi-Fi Corp),
  going live now

27
Outlook

• Profit growth visible across all business units
  within the division
• UCSSM A20 offering complementary to UCS Software
  service offerings
• Continued margin improvement in UCS Software
• Leverage strategic relationships to drive new
  business growth

Division well positioned for positive organic
growth and further margin improvement
28
Product Co
John Bright
29
There is more to UCS than meets the eye
GAAP
UCSSM
UCS Software
Product Co
UCS Solutions
Accsys
CEB
Fernridge
TSS-MS
UKS
UCSSM artefacts
Destiny E-Commerce
LifeWorld
Heritage products
3Js
30
There is more to UCS than meets the eye
The UCS Software IP iceberg (excluding customised
software) has far more value out of sight than
can be seen on balance sheet
Visible value on balance sheet
R46m
R9m
Product IP sold to Product Co
Heritage products
UCSSM artefacts
R65m
R???m
R??m
Invisible value not on balance sheet
31
Product Co background and rationale

• Why do we want to create Product Co?
• What is Product Co?
• Why must we separate Product Co from UCS?
• Benefits to UCS shareholders
• Benefits to UCS business
• Product Co update

32
Product Co why do we want to create it?

• Focus we believe that the primary focus of the
  enterprise is essential in determining its
  ultimate success
• The 3 primary areas of focus in a traditional
  software business like UCS Software fluctuate
  between
• Customer focus sales service, service,
  service
• Technology focus - .next
• Product focus competitive landscape, brand
  values, channels to market
• The UCS Software portfolio therefore requires
  businesses with these primary focus areas
• The first 2 are covered by the traditional UCS
  Software business and the UCSSM facility, the 3rd
  by the creation of Product Co

33
Product Co what is it?

• Product Co will acquire certain proprietary
  products and related intellectual property
  currently held by UCS Group
• Product Co will focus on taking this IP to the
  international markets by investing in the
  on-going building of its brands, its channels to
  market and its products
• Product Co will not provide software services
  it will go to market through a global channel of
  dealers who will provide the direct sales,
  integration, implementation and support services
  for retailers
• Product Co will leverage the facilities
  expertise of UCSSM for on-going product
  development and for its unique A2O offering for
  larger retail enterprises

34
Product Co why separate from UCS?

• The single biggest challenge to the ultimate
  success of Product Co lies in the building of an
  effective channel to market
• UCS Software (the traditional business) is the
  type of business that qualifies as an ideal
  channel partner for Product Co
• Product Co therefore needs to be independent of
  UCS in order to sign up other channel partners
  who may view UCS as competition, particularly
  when UCS expands internationally
• In addition, Product Co will require substantial
  investment and is forecast to make losses in its
  first 2 to 3 years as it invests in building its
  brand, its international channels to market and
  its product offerings
• UCS is not desirous of consolidating these
  losses, nor being automatically responsible for
  the provision of further future financial
  assistance, if required by product Co

35
Product Co benefits to UCS shareholders

• The SA market alone is too small to unlock the
  inherent potential value of the software IP
  owned by UCS
• The creation and unbundling of Product Co
  allows UCS shareholders to participate in the
  blue sky potential of taking this IP to
  international markets
• Product Co, as a separate business, will provide
  direct benefits to the UCS business

36
Product Co benefits to UCS business

• UCS Software will be the SA dealer for Product Co
  products and will enjoy the benefits of on-going
  product R D at no cost
• UCSSM will benefit through
• a 10 royalty on all licence sales by Product Co
• an outsourced product development contract with
  Product Co worth about R20m p.a.
• additional A2O project revenues for Active Retail
  A2O sales through Product Co international dealer
  channel

37
Relationship between the businesses
UCS Group Limited
Product Co
100
100
UCS Software Manufacturing
UCS Software
Outsourced Product Development (OPD) Contract
(R20m pa.)
Exclusive South African SDSP Contract (A2O
service)
Exclusive Product Distributor Contract for SA
International Product Distributor Contracts
International SDSP Channel
InternationalDealer Channel
International SDSP Contracts (A2O service)
38
Product Co Software licence revenue splits
Product Co
50
Product Co Dealer Channel
40
UCS Software Manufacturing
10
Product Co Dealer Channel includes UCS Software
for SA
39
Product Co ActiveRetail A2O revenue splits
Software Licence Revenues
A2O Project Revenues
Product Co
50
10
Product Co Dealer Channel
40
0
UCS Software Manufacturing
10
90
Product Co Dealer Channel includes UCS Software
for SA
40
Product Co update

• Indicative fair value of UCS software products
  related IP to be sold to Product Co (to be
  confirmed at effective date of transaction)
  R110.9m
• Current book value R46m, generating licence
  revenues for UCS in SA for the current six months
  ended 31 March 2007 of R7.2m
• Initial Product Co working capital requirements
  for 2 to 3 years in the region of R100m, to be
  provided by UCS through share subscription
• One of the options is that this working capital
  will be deposited back on loan account with UCS
  and drawn by Product Co as required over 2 to 3
  years
• First UK order for Active Retail in pilot store
  in Glasgow this month, acceptance testing by
  customer

41
In summary

• Long term objective to unlock shareholder value
  from our software IP through the creation of 3
  software businesses, each with their own primary
  focus (UCS Software, UCSSM Product Co)
• Product Co is the first step in terms of
  unlocking software value
• The next steps for Product Co will be
• Circular to shareholders giving full financial
  effects and other statutory data
• Garnering sufficient shareholder support in order
  to launch
• Full implementation (target by end of this
  financial year)

42
BEE updateRichard Newton
43
BEE update

• Good progress
• 2 equity transactions announced since year end
• TSS 25.1 stake in UCS Solutions Holdings rolled
  up to UCS Group effective 1 March 2007
• The proposed Accsys BEE transaction covered in
  the post balance sheet event section of our
  results announcement to be implemented by 1
  June 2007 (subject to due diligence review, board
  approvals and possible regulatory approvals)
• Both core operating units (UCS Solutions UCS
  Software) have developed detailed plans covering
  all other elements of the DTI codes
• UCS BEE equity strategy remains to do deals that
  involve growth and operational synergies, that
  address all aspects of BEE and that are earnings
  enhancing for all shareholders

44
BEE update

• The Group is positioning for expansion into
  international markets which will probably require
  the raising of additional capital in those
  markets
• As a consequence, UCS Group is reviewing its
  structure in order to ensure that potential
  international corporate activity does not
  adversely affect its BEE status in local
  operations

45
Looking forwardJohn Bright
46
Defined initiatives for growth

• The creation, financing and unbundling of Product
  Co
• The ongoing development of UCSSM international
  channels to market and ultimate positioning of
  UCSSM for future IPO and unbundling
• The creation of a value added services unit
  through reorganisation and integration of
  existing UCS assets supplemented with targeted
  acquisitions
• The reorganisation and integration of our
  infrastructure service offerings
• The ongoing search for a business to acquire that
  is appropriate for use as the platform for the
  establishment of a significant UCS presence in
  the UK market

47
Prospects for the remainder of the year

• Solutions Services Division full consulting
  order book and good prospects for all units,
  should deliver continued growth
• Software Division good business conditions and
  the ongoing margin improvement program, should
  deliver continued growth
• Product Co launch
• UCSSM working hard to complete 1st local
  roll-out of A2O project and also to secure first
  international A2O order

Overall, the Group is well placed to deliver
continued strong growth in cash earnings for the
full year to September 2007
48
NOW, DO YOU SEE US DIFFERENTLY?

• Thank you / QA