| Tue 1 Apr 2008, 8:29 | | SQE - Square One Solutions Group Limited - Audited results for the year ended 31 |
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SQE
SQE
SQE - Square One Solutions Group Limited - Audited results for the year ended 31
December 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")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
The audited results of the Square One Group for the year ended 31 December 2007
are set out below.
Balance Sheets
Figures in Rand 31 December 31 December
2007 2006
R `000 R `000
ASSETS
NonCurrent Assets 48 846 29 931
Fixed Assets 8 828 7 493
Intangible assets 31 132 15 814
Deferred Tax 8 886 6 624
Current Assets 61 469 53 113
Inventory 19 109 18 127
Trade and other receivables 38 912 30 376
Cash and cash equivalents 3 448 4 610
Total Assets 110 315 83 044
EQUITY AND LIABILITIES
Equity and reserves 38 400 19 071
Share capital 31 268 17 276
Retained income 7 132 1 795
Outside Shareholders Interest - 686
Outside Shareholders Loans - 251
NonCurrent Liabilities 19 683 17 544
Long term liabilities 19 683 17 544
Current Liabilities 52 232 45 492
Current portion of long term 5 366 5 701
liabilities
Current tax payable 21 7
Trade and other payables 45 650 39 107
Provisions 1 195 677
Total Equity and Liabilities 110 315 83 044
Net asset value per share (cents per 86.5 60.3
share)
Net tangible asset value per share 16.4 10.3
(cents per share)
Number of shares in issue at year 44 394 31 628
end (`000)
Income statements
Figures in Rand Year ended Year ended
31 December 31 December
2007 2006
R`000 R`000
Revenue 163 615 171 781
Operating profit 10 344 8 281
Profit on sale of subsidiary 363 -
Finance costs (net) (3 339) (3 277)
Profit before taxation 7 368 5 004
Taxation (2 031) (1 451)
Attributable to ordinary equity 5 337 3 553
holders
Reconciliation to headline earnings: 5 337 3 553
Adjustments for:
Profit on disposal of non-core (363) -
subsidiary
Headline earnings for the year 4 974 3 553
Earnings per share (cents per share) 15.6 11.2
Headline earnings per share (cents 14.5 11.2
per share)
Weighted average number of shares in 34 235 31 628
issue (`000)
Statement of Changes in Equity
Figures in Rand Share Share Shares Distrib Sub- Minorit Total
capital premium to be utable total y equity
R `000 R `000 issued Reserve R `000 Interes R `000
R`000 s ts
R `000 R `000
Balance at 01 281 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
year
Balance at 01 316 16 960 - 1 795 19 071 686 19 757
January 2007
Issue of shares 13 869 13 110 - 13 992 - 13 992
Disposal of - - - - - (686) (686)
subsidiary
Surplus for the - - - 5 337 5 337 - 5 337
year
Balance at 31 329 17 829 13 110 7 132 38 400 - 38 400
December 2007
Abridged Cash Flow Statements
Figures in Rand 31 December 31 December
2007 2006
R `000 R `000
Cash flows (utilised in)/generated 3 980 10 439
from operating activities
Cash flows utilised in investing (20 336) (13 124)
activities
Cash flows from financing activities 15 194 1 611
Total cash movement for the year (1 162) (1 074)
Cash at the beginning of the year 4 610 5 684
Total cash at end of the year 3 448 4 610
COMMENTARY
The board of directors are pleased to present the company`s audited results for
the year ended 31 December 2007. The directors are reporting attributable and
headline earnings of R5.3 million and R4.97 million respectively, which
represents an approximate 50% improvement over the prior year earnings.
These audited results have been prepared on the basis of consistent accounting
policies that comply with International Financial Reporting Standards ("IFRS").
The results have been audited by TCG Chartered Accountants S.A. and the
unqualified audit opinion is available for inspection at the registered office
of the company.
HISTORY AND NATURE OF BUSINESS
Square One listed during 2000 and since 2003 have embarked on a thorough
evaluation and restructure of the business in order to distinguish its service
offering to SMME customers and improve returns to shareholders. This change in
strategy has proved successful, with the group`s primary solution offerings
focusing around the provision of niche vertical offerings encompassing
Industrial Coding and Marking Solutions, Unified communication solutions and
services, Infrastructure, Electrical and Facility Solutions, as well as Rental
and Finance solutions.
The strategic intent of the Group has been to diversify the nature of the
business to a higher margin, solutions based business. The Group now 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, as evidenced by the growth in earnings and headline earnings
compared to the prior period. The business is evolving into a value-adding,
applied technology solutions provider to its customers and is experiencing
sustainable organic growth in its solutions, service and rental operations.
INDUSTRY AND BUSINESS OVERVIEW
The Group`s core operations are focused on the provision of value-based
solutions centred on Unified communications, Infrastructure, electrical and
facility solutions, Industrial coding and marking solutions and Rental and
finance solutions to its key target market of Enterprise, SME, Corporate and
Government clients. The company also supports the above offerings through the
provision of a 24x7x365 national support and service call centre.
The Group`s value-based offerings are centred on:
* Unified Communication solutions
* Infrastructure Solutions
* Network Solutions
* Policy and Lawful Interception Solutions
* Industrial Coding and Marking Solutions
* CIJ
* Laser
* Outer Case Coding
* Commercial Printing
* Outsourced Coding Solutions
* Infrastructure, electrical and facility solutions and services
* Finance, rental and leasing Services.
FINANCIAL OVERVIEW
The results for the year ended 31 December 2007 reflect earnings and headline
earnings attributable to ordinary shareholders of R5.3 million and R4.97 million
respectively for the year under review. The earnings and headline earnings per
share for the year ended 31 December 2007 are 15.6 cents and 14.5 cents per
share respectively. The earnings have 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.
Income statement review
The Group has been focussing on diversifying the business into a service and
annuity type business, which, although reflecting lower turnover, typically
attracts a higher gross margin for the group, hence the decline in turnover of
5% but an increase in operating profit of around 25%. This focus is reflected
in the growth in annuity based business from approximately 10% of turnover in
the prior comparable period to around 25% for the year under review. Contracts
being signed with customers vary from 1 to 5 year service and/or rental
contracts. The integration of NETIntellect, and related costs thereof, has been
absorbed during the first six months of the year under review and profitability
in this business is now growing as is evidenced by the results achieved for the
year. The results also incorporate two months of earnings in relation to the
acquisitions described below.
Net finance costs have been kept in line with the prior year, due to a reduction
of R6 million in the company`s obligation to Citibank during the first half of
the year. The subsequent increase in borrowings in the second six months is
directly related to the acquisitions as detailed below.
A profit on sale of a non-core subsidiary was made during the year under review,
which has been added back for headline earnings purposes.
Balance sheet review
Fixed assets increased over the prior year due to an upgrade of software during
the year and growth in the group`s rental business, which is increasing at the
rate of approximately 10% per quarter.
Intangible assets increased substantially due to the acquisition of Structured
Infrastructure Solutions (Proprietary) Limited ("SIS") with effect from 01
November 2007.
Long-term liabilities to Citibank were reduced by R6 million during the first
half of the year. The subsequent increase in borrowings in the second six
months is directly related to the acquisitions as detailed below.
Accounts receivable and payable balances have increased in line with increased
turnover in the second half of the year and acquisitions as detailed below,
while inventory balances decreased due to the company reducing its focus on the
distribution side of the business.
Cash Flow Statement review
Cash flow from operations is in line with net profit, with cash flows in
relation to investing and financing activities primarily relating to the
acquisition of SIS.
DIVIDENDS
The directors have decided not to declare a dividend for the year under review.
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.
With effect from 01 November 2007, the company has acquired 100% of SIS for a
purchase consideration of R12 535 000, to be settled through the issue of 10 900
000 new Square One shares, which transaction was announced on SENS on 28
February 2008. The results of SIS have been consolidated due to sufficient
irrevocable undertakings being in place relating to the required approval for
the transaction. Details of pro forma financial effects of the transaction will
be announced shortly and a circular will be posted to shareholders in due
course. Shareholders are referred to the cautionary announcement below. Square
One acquired the remaining 49% in Square One (Proprietary) Limited for a
consideration of R575 000, to be settled by the issue of 500 000 new Square One
shares.
DIRECTOR CHANGES
Mr Anton Meyer resigned from the board on 5 June 2007. There have been no other
changes in directors for the year under review.
CHANGE IN AUDITORS
Russel Bedford Southern Africa (JHB) Inc. has been auditors of the group since
the listing in 2000. After a review of our corporate governance requirements the
parties have mutually agreed to a rotation of auditors and accordingly Russel
Bedford resigned as auditors with effect from 20 December 2007 and TCG Chartered
Accountants S.A. were appointed as auditors on the same day.
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 continue to improve over the next year, both
through strong, sustainable organic growth as well as strategic acquisitions
which are either in progress or targeted over the next 12 to 18 months. The
Group has an estimated 30% market share in the industrial coding market, which
market remains an acquisition focus of the group.
Square One has effectively completed the transition to its new business model
and will continue in line with its strategic intent to dominate the markets in
which it operates through both organic and acquisitive growth. In terms of
acquisitions moving forward, Square One is excited about initiatives that are
currently underway, which will satisfy its expansion-related goals.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
As advised on SENS and in the press on 28 February 2008, pro forma financial
effects still need to be published relating to the acquisition of SIS.
Accordingly shareholders should continue to exercise caution when dealing in
their securities.
By order of the Board
G Coetser C Alexander
Chairman Chief Executive Officer
31 March 2008
Johannesburg
Registered Office
34 Monkor Drive, Randpark Ridge, Randburg, 2156, South Africa
PO Box 1163, Gallo Manor, 2052, South Africa
Directors
Executive C Alexander (CEO), T James, R Muzariri, (Vice Chair)
Non-Executive G Coetser (Chair), Prof M Makhanya,, R
Masebelanga (Dep Chair), K Socikwa,
Sponsor Transfer Office
Exchange Sponsors Link Market Services South Africa
(Proprietary) Limited (Proprietary) Limited
Date: 01/04/2008 08:29:01 Produced by the JSE SENS Department.
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