| Tue 25 Sep 2007, 10:35 | | SQE - Square One - Unaudited results for the 6 mon |
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SQE
SQE
SQE - Square One - Unaudited results for the 6 months ended 30 June 2007
SQUARE ONE SOLUTIONS GROUP LIMITED
Incorporated in the Republic of South Africa)
(Registration number 1999/026822/06)
Share code: SQE & ISIN: ZAE00023768
("Square One" or "the company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 30 JUNE 2007
The unaudited results of Square One Solutions Group for the six months ended
30 June 2007 are set out below.
Balance Sheets
Figures in Rand Unaudited Unaudited Audited
30 June 2007 30 June 2006 31 December 2006
R `000 R `000 R`000
ASSETS
Non-Current Assets 27 654 18 453 29 931
Fixed Assets 6 201 1 807 7 493
Intangible assets 15 784 9 690 15 814
Deferred Tax 5 669 6 956 6 624
Current Assets 65 470 64 884 53 113
Inventory 18 656 15 965 18 127
Trade and other 45 494 45 354 30 376
receivables
Cash and cash equivalents 1 320 3 565 4 610
Total Assets 93 124 83 337 83 044
EQUITY AND LIABILITIES
Equity and reserves 22 704 14 707 19 071
Share capital 18 207 13 726 17 276
Retained income 4 497 981 1 795
Outside Shareholders - 686 686
Interest
Outside Shareholders Loans - 271 251
Non-Current Liabilities 14 245 19 761 17 544
Long term liabilities 14 245 19 761 17 544
Current Liabilities 56 175 47 912 45 492
Current portion of long 5 744 4 205 5 701
term liabilities
Current tax payable - - 7
Trade and other payables 49 758 42 338 39 107
Provisions 673 1 369 677
Total Equity and 93 124 83 337 83 044
Liabilities
Net asset value per share 68.89 52.36 60.27
(cents per share)
Net tangible asset value 21.00 17.87 10.27
per share (cents per
share)
Number of shares in issue 32 957 28 101 31 628
at period end (`000)
Income statements
Figures in Rand Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
30 June 2007 30 June 2006 30 December 2006
R`000
R`000 R`000
Revenue 79 622 96 621 171 781
Operating profit 4 967 5 188 8 281
Finance costs (net) (1 310) (1 328) (3 277)
Profit before taxation 3 657 3 860 5 004
Taxation (955) (1 120) (1 451)
Profit for the period 2 702 2 740 3 553
Attributable to ordinary 2 702 2 740 3 553
equity holders
Adjustments for headline
earnings:
Profit on disposal of non- (364) - -
core subsidiary
Headline earnings for the 2 338 2 740 3 553
period
Earnings per share (cents 8.2 9.8 11.2
per share)
Headline earnings per share 7.1 9.8 11.2
(cents per share)
Weighted average number of 32 957 28 101 31 628
shares in issue (`000)
Statement of Changes in Equity
Figures in Rand Share Share Distributa Sub- Minority Total
capital premium ble total Interests equity
R `000 R `000 Reserves R `000 R `000 R `000
R `000
Balance at 1 281 13 445 (1 758) 11 968 686 12 654
January 2006
Issue of shares 35 3 515 3 550 3 550
Surplus for the 3 553 3 553 3 553
period
Balance at 1 316 16 960 1 795 19 071 686 19 757
January 2007
Issue of shares 14 917 931 931
Disposal of (686) (686)
subsidiary
Surplus for the 2 702 2 702 2 702
period
Balance at 30 330 17 877 4 497 22 704 - 22 704
June 2007
Abridged Cash Flow Statements
Figures in Rand Unaudited Unaudited Audited
30 June 2007 30 June 31 December
2006 2006
R `000 R `000 R `000
Cash flows (utilised 175 (2 134) 10 439
in)/generated from operating
activities
Cash flows utilised in (846) (283) (13 124)
investing activities
Cash flows from financing (2 619) 298 1 611
activities
Total cash movement for the (3 290) (2 199) (1 074)
period
Cash at the beginning of the 4 610 5 684 5 684
period
Total cash at end of the period 1 320 3 565 4 610
COMMENTARY
The board of directors are pleased to present the company`s interim results
for the 6 month period ended 30 June 2007. The directors are reporting
attributable earnings of R2.7 million, which are in line with last year, and
headline earnings of R2.3 million. The earnings are in line with budget,
which has allowed for certain restructuring and integration costs following
the acquisition of NETIntellect (Proprietary) Limited. The board is pleased
to advise that the acquisition has now been fully integrated and is expected
to contribute to growing profitability going forward.
These unaudited interim results have been prepared in accordance with IAS 34 -
Interim Financial Reporting on the basis of consistent accounting policies
that comply with International Financial Reporting Standards ("IFRS").
BACKGROUND AND NATURE OF BUSINESS
The Square One Solutions Group was founded in 1986 and listed in the year
2000. The Group is an applied technology solutions provider listed under the
"Information Technology (IT) - Software and Computer Services" sector of the
JSE Limited ("JSE"). Square One boasts 21 years of business experience with
national representation.
The Square One Solutions Group`s primary focus is the provision of niche,
vertically applied, technology solutions. The Group`s primary solution
offerings encompass Law Enforcement & Authentication offerings, Industrial
Coding and Marking Solutions, Infrastructure and Facility solutions, Systems
Integration services, Telecommunications and Service Provider solutions,
supported by a tailored suite of Finance and leasing solutions and services.
The Group focuses on coupling innovation, technology and service in order to
achieve value for its clients while achieving superior returns and growth in
earnings for its shareholders.
FINANCIAL OVERVIEW
The results for the 6 months ended 30 June 2007 reflect an earnings and
headline earnings attributable to ordinary shareholders of R2.7 million and
R2.3 million respectively. The earnings and headline earnings per share for
the 6 month period ended 30 June 2007 is 8.2 and 7.1 cents respectively..
Income statement review
The Group has been focussing on diversifying the business into a services and
annuity based business, which, although reflecting a lower turnover, typically
attracts higher gross margins for the Group. This has been a focus in both
the services and rentals business units, with a growth in annuity based
business from approximately 10% of turnover in the prior comparable period to
around 25% for the period under review. Contracts being signed with customers
vary from one to five year service and/or rental contracts. The integration
of NETIntellect, and the related costs thereof, have been absorbed during the
period under review and profitability in this business is now growing. The
results, whilst down slightly on the prior period, are in line with budget.
The issue of shares for cash to a BEE partner as detailed below had a dilutive
effect on earnings and headline earnings per share to 8.2 and 7.1 cents per
share respectively. However, this relationship, together with the existing
Proudafrique BEE shareholding is already providing benefit, as the Group is
now well positioned with its client base with respect to BEE matters.
The strategic intent of the Group during the period under review was to
diversify the nature of the business to a higher margin, solutions-based
business. To achieve this, changes in the operating profit margins as well as
the quality of revenue became imperative. Taking these facts into
consideration, the resultant revenue decrease of 17.59% to the comparable
period with only a 4.26% drop in operating profit illustrates that the company
continues to move in the intended direction and as such has seen the resultant
increase in gross margin contribution.
Net finance costs decreased for the comparable period and are attributable to
better working capital management.
A profit on the sale of a non-core subsidiary was made during the period under
review, which has been added back for headline earnings purposes.
Balance sheet review
Property, plant and equipment increased over the prior period largely due to
the acquisition of NETIntellect and growth in the Group`s rental business.
Intangible assets increased following the acquisition of NETIntellect and an
upgrade of software during the second half of the prior year.
During the period, cash has been applied to the reduction of long-term
liabilities, primarily comprising a term loan from CitiBank, which has further
reduced by approximately R6 million compared to the prior period.
Accounts receivable balances were in line with the comparable period in 2006,
while inventory balances increased in support of servicing longer term annuity
based support and maintenance contracts.
Cash Flow Statement review
As mentioned earlier, cash flow has primarily been applied to reduce interest
bearing debt.
DIVIDENDS
The directors have decided not to declare an interim dividend.
ACQUISITIONS AND ISSUE OF SHARES FOR CASH
At a general meeting held on 11 June 2007, shareholders approved the specific
issue of 1 428 571 shares at 70 cents per share to Utho Investments Holdings
(Proprietary) Limited, a Black Economic Empowerment Group.
There have been no acquisitions during the period under review.
SUBSEQUENT EVENTS
There have been no significant subsequent events that require reporting.
DIRECTOR CHANGES
Mr Anton Meyer resigned from the board on 5 June 2007. There have been no
other changes in directors for the period under review.
LITIGATION
There is no litigation pending against the company.
FUTURE PROSPECTS
The groundwork has been firmly established enabling Square One to unlock
greater profitability and tie in sustainable annuity income for the Group, in
line with its strategic intent to diversify the business offering.
Profitability is expected to further improve over the next six months, in line
with budgets. The business is evolving into a value-adding, vertically-
centric solutions provider to its customers and is experiencing organic growth
in its solutions, service and rental operations.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
As advised on SENS and in the press on 7 September 2007, the company is still
in negotiations and shareholders should continue to exercise caution when
dealing in their securities.
By order of the Board
G A Coetser C L Alexander
Chairman Chief Executive Officer
25 September 2007
Johannesburg
Registered Office
34 Monkor Drive, Randpark Ridge, Randburg, 2156, South Africa
PO Box 1163, Gallo Manor, 2052, South Africa
Directors
Executive C L Alexander (CEO), W T James, R T Muzariri, (Vice
Chair)
Non-Executive G A Coetser (Chair), Prof M S Makhanya,, R R
Masebelanga (Dep Chair), K X T Socikwa,
Sponsor Transfer Office
Exchange Sponsors Link Market Services South Africa
(Proprietary) Limited (Proprietary) Limited
Date: 25/09/2007 10:35:01 Produced by the JSE SENS Department.
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