| Thu 27 Sep 2001, 0:00 | | Square One Solutions Group Limited - Interim Resul |
|
Amended Interim results
for the six months ended 30 June 2001
Income statement
Six months Six months
to 30 June to 30 June
2001 2000
R'000 Unaudited Unaudited
Turnover 74 387 56 352
Operating profit 21 2 045
Net finance costs (1 247) (870)
Profit/(loss) before taxation (1 226) 1 175
Taxation - (352)
Net profit/(loss) after tax (1 226) 823
Attributable to outside shareholders (211) -
Net profit/(loss) attributable to
ordinary shareholders (1 437) 823
Balance sheet
30 June 30 June
2001 2000
R'000 Unaudited Unaudited
Assets
Non-current assets 8 513 1 994
Fixed assets 2 526 1 974
Goodwill 5 967 -
Loans receivable 20 20
Current assets 53 636 44 907
Inventories 18 789 18 791
Accounts receivable 34 229 24 052
Bank balances 618 2 064
Total assets 62 149 46 901
Equity and liabilities
Issued capital 9 020 9 529
Retained income 2 096 712
Outside shareholders' interest 1 587 -
Outside shareholders' loans 723 -
Long-term liabilities 661 901
Current liabilities 48 062 35 759
Accounts payable 32 438 21 267
Taxation 221 -
Shareholders' loan - 2 181
Current portion of long-term
liabilities 295 -
Bank overdraft 15 108 12 311
Total equity and liabilities 62 149 46 901
CASH FLOW STATEMENT
12 months
to 30 June
2001
Net flow from operating activities 2 681
Net flow from investing activities (6 544)
Net flow from financing activities (380)
Net increase/(decrease) in cash (4 243)
Cash at beginning of period (10 247)
Cash at end of period (14 490)
STATEMENT OF CHANGES IN EQUITY
Share Share Distributable Capital and
capital premium reserves reserves
Balance 31 December 2000 220 8 800 3 533 12 533
Deficit for period (1 437) (1 437)
Balance 30 June 2001 220 8 800 2 096 11 116
Earnings/(Loss) per share
Earnings/(loss) per share of (6.5 cents) is calculated by using attributable
profit/(loss) of (R1 437 000) and issued shares of 22 000 000.
Headline earnings/(loss) per share of (5 cents) is calculated by using
attributable headline profit/(loss) of (R1 109 000) and issued shares of 22
000 000.
Commentary
Financial and operational review
The core business of Square One's sales divisions include document handling
and information sharing solutions; knowledge management; networking;
hardware, software and consumable products distribution; Internet, IT
security (biometrics) and
e-commerce technologies; data storage; variable data product marking and
coding solutions; uninterruptible power supplies and value-added business
services.
Most of the company's sales divisions achieved their performance targets,
contributing to revenue increasing by 32 percent to R74,4 million over last
year's R56,3 million. Despite the strong growth in revenue, the company
reported a headline loss of R1,4 million for the period, reversing a profit
of R823 000 in the first half of 2000.
This is partially attributable to corporate consolidation and restricted
spending in the slowing global economy. Communication and information
technology (CIT) companies such as Square One are undertaking aggressive
cost-management and expense reduction programmes.
Besides the global environment other factors have also affected
profitability. The impact of last year's international acquisition by Xerox
of the Tektronix Colour Printing and Imaging Division has had an adverse
effect on the supply of stock to Square One. Deliveries on Xerox-Tektronix
products were erratic and up to six months late, as a result of which sales
for this six-month period were lower than the average monthly sales recorded
in the previous financial year.
A further contributing factor to the decline in profitability was Square
One's efforts to satisfy customer demand for Xerox-Tektronix supplies and
spare parts through sourcing these from elsewhere in the world at much
reduced margins.
However, all issues relating to the availability of Xerox-Tektronix stock
have been resolved and Square One's exclusive South African distribution
contract has been extended to 2002.
The revenue generated from Xerox-Tektronix sales has traditionally accounted
for approximately 50 percent of the group's earnings. However, for over two
years the company has been actively pursuing a strategy to reduce and limit
product dependency. The benefits of this are already evident; an example is
the storage division that has grown from a nominal revenue base into a
strong and viable revenue generator.
In line with the group's stated strategy of global expansion, Square One
acquired an Australian base earlier this year when it purchased a majority
interest in the largest Xerox-Tektronix reseller in Australia, with branches
in Sydney, Melbourne and Brisbane. The company has been renamed Square One
Investments Australia and has made an immediate revenue contribution of R6,7
million in the reporting period.
Impending legislation will make date information detail mandatory on
products for both local and export use. This is expected to have a
significant impact on anticipated coding and marking revenues within South
Africa's manufacturing sectors. Square One's wholly-owned coding and marking
division is still an untapped revenue area with excellent prospects.
UPScom, an uninterruptible power supply company in which Square One has a
majority shareholding, offers one of the most comprehensive and robust
product line-ups. Testimony to the credibility of this line-up is UPScom's
incremental sales growth and the excellent pending and active tender
prospects within the government, parastatal and corporate markets.
On 1 January 2001 the company purchased 100% of the shares in Activated
Learning Group (Proprietary) Limited. The difference between the fair value
of the consideration paid and the fair value of net tangible assets of
subsidiaries at the date of acquisition is charged or credited to goodwill
arising on consolidation. Goodwill is amortised over a period of 10 years.
In the event of a permanent impairment in the value of a subsidiary, the
relevant unamortised balance is written off.
Outlook
Square One's positioning in high-growth sectors in the IT and information
management solutions environment will ensure a sustained growth in revenue,
which should translate into improved earnings in 2002. The directors are
positive that Square One will return to profitability in the last quarter of
the year as the benefits of its expense management programme become evident,
coupled to regular inventory supply. Square One remains confident in the
long-term prospects of the CIT sector.
Directors' statement
These results comply in all material respects with the requirements of AC127
of the South African Statements of Generally Accepted Accounting Practice,
as well as the South African Companies Act of 1973, as amended.
By order of the board
Garth Coetser Trevor James Sandton
Chairman Chief Executive Officer 25 September 2001
Registered address
Eastgate Park, 8 Commerce Crescent West, Eastgate Extension 13, Sandton
(PO Box 1163, Gallo Manor 2052)
Telephone: (011) 321-5900. Telefax: (011) 444-6650. www.sql.co.za
Transfer secretaries
Computershare Limited
PO Box 61051, Marshalltown 2107
