| Wed 30 Sep 2009, 13:25 | | SQE - Square One - Unaudited Interim Results For The Six Months Ended 30 June |
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SQE
SQE
SQE - Square One - Unaudited Interim Results For The Six Months Ended 30 June
2009
Square One Solutions Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1999/026822/06)
Share code: SQE & ISIN: ZAE000023768
("Square One" or "the company")
Unaudited interim results for the six months ended 30 June 2009
The unaudited interim results of Square One Solutions Group for the six months
ended 30 June 2009 are set out below.
Balance Sheets
Figures in Rand 30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
ASSETS
Non-Current Assets 46,083 47,795 47,460
Fixed Assets 5,916 7,791 7,482
Intangible assets 31,302 31,181 31,156
Deferred Tax 8,865 8,823 8,822
Current Assets 81,275 72,653 71,536
Inventory 15,510 23,804 14,525
Trade and other 65,124 48,808 56,994
receivables
Cash and cash equivalents 634 41 10
Taxation 7 - 7
Total Assets 127,358 120,448 118,996
EQUITY AND LIABILITIES
Equity and reserves 38,372 38,562 38,483
Share capital 31,268 31,268 31,268
Retained income 7,104 7,294 7,215
Non-Current Liabilities 24,814 25,480 15,444
Long term liabilities 24,814 25,480 15,444
Current Liabilities 64,172 50,841 65,069
Current portion of long 1,284 2,397 1,752
term liabilities
Current tax payable - 21 -
Trade and other payables 61,931 47,989 60,134
Provisions 957 434 1,214
Bank overdraft - 5 565 1,969
Total Equity and 127,358 114,883 118,996
Liabilities
Net asset value per share 86.4 86.9 86.7
(cents)
Net tangible asset value 15.9 16.6 16.5
per share (cents)
Number of shares in issue 44,394 44,394 44,394
at period end (`000)
Income statements
Figures in Rand 6 months 6 months Year ended
ended ended
30 June 2009 30 June 2008 31 December
2008
R`000 R`000 R`000
Revenue 54,252 93,388 207,790
Operating profit 385 2,277 2,495
Finance costs (net) (547) (2,052) (2,268)
(Loss)on disposal of - - (80)
subsidiary
Profit on disposal of asset 8 - -
Profit before taxation (154) 225 147
Taxation 43 (63) (64)
Profit for the period (111) 162 83
Attributable to minorities - - -
Attributable to ordinary (111) 162 83
equity holders
Adjustments for headline
earnings:
Loss on disposal of non- - - 80
core subsidiary
Profit on sale of asset (8) - -
Headline earnings for the (119) 162 163
period
Earnings per share (cents) -0.3 0.4 0.2
Headline earnings per share -0.3 0.4 0.4
(cents)
Weighted average number of 44,394 44,394 44,394
shares in issue (`000)
Statement of Changes in Equity
Figures in Rand Total
Share Share Distribu Sub- Minority equity
capital premium table total Interest
Reserves s
R `000 R `000 R `000 R `000 R `000 R`000
Balance at 444 30,824 7,132 - 38,400
01 January 2008 38,400
Surplus for the 83 83 83
year
Balance at 444 30,824 7,215 - 38,483
31 December 2008 38,483
Surplus for the (111) (111) (111)
period
Balance at 444 30,824 7,104 - 38,372
30 June 2009 38,372
Cash Flow Statements
Figures in Rand 30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Cash flows (utilised (6,114) (13,622) 2,421
in)/generated from
operating activities
Cash flows utilised in (662) (1,147) (3,589)
investing activities
Cash flows from financing 9,369 5,797 (4,239)
activities
Total cash movement for the 2,593 (8,972) (5,407)
period
Cash at the beginning of (1,959) 3,448 3,448
the period
Total cash at end of the 634 (5,524) (1,959)
period
COMMENTARY
The board of directors is pleased to present the company`s results for the
interim period ended 30 June 2009. These unaudited 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") the Listings requirements of the JSE and the Companies Act of 1973 as
amended.
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 company listed under the "Information
Technology (IT) - Software and Computer Services" sector of the JSE Limited
("JSE").
Square One Solutions Group`s primary focus is the provision of niche, applied
technology solutions. The Group has strong black ownership and management, a
national footprint and more than 23 years experience focused on the South
African market. The Group`s value-based offerings are centred on:
Unified Communication solutions
Networking solutions
Data
Voice
Policy and Lawful Interception solutions
Data
Voice
Infrastructure solutions
Power solutions
Facility solutions
Coding and Marking solutions
CIJ
Laser
Outer case coding
Commercial printing
Outsourced coding solutions
Finance and leasing 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.
INDUSTRY AND BUSINESS OVERVIEW
Square One`s primary service focuses on providing niche business-enabling,
technology solutions, which create value for its clients through the application
of business knowledge and best practices, technological skills and capability.
The Group`s core operations are focused on the provision of value-based
solutions centred around Unified Communications solutions, Infrastructure,
Electrical and Facility solutions, Industrial Coding and Marking solutions and
Finance, Leasing and Rental solutions to its key target market of enterprise,
SME, corporate and Government clients. The Company also provides 24x365 national
support and service.
FINANCIAL OVERVIEW
The results for the interim period ended 30 June 2009 reflect earnings and
headline deficit attributable to ordinary shareholders of R111,000(2008:
Earnings R162,000) and R119,000 (2008: Earnings R162,000) respectively for the
period under review. The deficit and headline deficit per share for the interim
period ended 30 June 2009 is -0.3 cents (2008: Earnings 0.4 cents) and -0.3
cents (2008: 0.4 cents) per share.
Income statement review
Turnover has decreased by 41% over the prior period as a result of cutbacks in
technology spend budgets by clients across the board in response to the major
economic downturn that we are facing. Gross profit has however only decreased by
12% due to higher margins achieved. In line with prior year initiatives, the
Group has continued with its focus on reducing turnover from low margin business
to service and contract type business which typically attracts a higher gross
margin for the Group. Consequently, gross margins in the operating units have
held up very well particularly in light of the economic decline that has
severely impacted upon us as a result of the financial markets driven turmoil.
The contracts being signed with customers vary from 1 to 5 year service and/or
rental contracts. In addition, the Group in the past year, focussed on
diversifying the customer base and strategically positioning the company into
new and parallel markets, primarily the government and parastatal markets.
Unfortunately in the 1st half of the year orders from a major fixed line
telecommunications client declined substantially mainly attributable to the
current economic climate. We expect that activity will resume with that client
at a reasonable level from early 2010.
Operating expenses remained constant at approximately R35.8 million in the
period as compared to the prior period.
Expenses are being reviewed and where appropriate action is being taken to
realign our cost structures with current revenue levels. Whilst this process is
painful we expect that we will reap the benefits of longer term sustainability
as a more than 23 year-old business in this tough trading environment.
Net finance costs decreased for the comparable period due to the ongoing
reduction of interest-bearing liabilities.
The Group has, for the past five years, returned consistent growth for the
market and shareholders alike. Accordingly, the executive team trusts that the
market, our valued shareholders, clients, partners and other stakeholders will
support the continued strategic intent to accelerate the growth of the business
through the initiatives concluded in the prior year and current reporting
period.
In particular, the Group is starting to experience the positive effects of its
focus on the government and parastatal sector with growing orders being received
from provincial and national government departments in the 2nd and into the 3rd
quarter of 2009.
Balance sheet review
Fixed assets have decreased slightly over the prior year as there have been no
significant acquisitions of assets in the reporting period.
With the recent financial markets turmoil, there is a sharp pull back on
financing activities and we have seen a sharp slowdown in this business for the
first half of 2009. However as interest rates have declined we have started to
see recovery in this business unit and expect to end the year strongly.
Accounts receivable increased by 33%, primarily due to the trade debtors mix
changing and shifting towards longer receipt cycles from parastatal and
government customers. Stock declined by 35% from the prior period due to
improved management of stock levels and the requirement for upfront payments in
the new business area.
Accounts payable have increased marginally from the December period.
Cash Flow Statement review
As mentioned earlier, cash flow utilised in operating activities has primarily
been applied to working capital, with a large increase in debtors in line with
normal terms in the parastatal and government business. Cash inflow from
financing activities primarily relates to shareholder funding advanced to the
Group.
The increase in applied shareholder funding further validates the faith and
commitment that the founding shareholders have in the strategic direction of the
business.
DIVIDENDS
The directors have decided not to declare an interim dividend.
ACQUISITIONS AND ISSUE OF SHARES FOR CASH
There have been no acquisitions and no issues of shares for cash during the
period under review.
SUBSEQUENT EVENTS
There have been no significant subsequent events that require reporting.
DIRECTOR CHANGES
As reported previously Mr Craig L Alexander resigned as a Director and CEO of
Square One, with effect from 1 September 2009.
CHANGE OF AUDITOR
There have been no changes to the auditors to the company.
LITIGATION
There is no litigation pending against the company.
FUTURE PROSPECTS
Whilst the results appear to indicate a decline in the business, the
fundamentals and state of contracts are all healthy. The business and customers
are more diversified. The Group has and continues to bolster its core skills
sets and has a balance of seasoned professionals working for the business.
Square One operates at the top of the SME market and has now successfully
entered the government and parastatal markets through strategic alliances and
associated initiatives. Square One`s existing business is still profitable
albeit supported by key restructuring initiatives currently underway and Square
One is geared up to service the new business opportunities recently secured. The
strategic direction of the Group remains consistent with previously stated
intent and the group has used this solid foundation as a springboard into the
newly acquired markets and client base.
Square One expects a continued, managed and sustainable growth trend in its
strategic areas of focus. Operating costs continue to be reviewed and where
appropriate reduced and it is anticipated that Square One will realise the
benefits from the new direction taken in the second half of the year. With the
groundwork now in place, Square One expects to unlock greater profitability,
whilst continuing to secure additional, sustainable and predictable contract
based revenues for the group.
By order of the Board
G Coetser R Muzariri
Chairman Vice Chairman
30 September 2009
Johannesburg
Registered Office
34 Monkor Drive, Randpark Ridge, Randburg, 2156, South Africa
PO Box 1163, Gallo Manor, 2052, South Africa
Directors
Executive T James, R Muzariri, (Vice Chair)
Non-Executive G Coetser (Chair), Prof M Makhanya, R
Masebelanga, FF Gqiba
Sponsor Transfer Office
Grindrod Bank Limited Link Market Services South Africa
(Proprietary) Limited
Date: 30/09/2009 13:25:01 Produced by the JSE SENS Department.
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