| Wed 3 Apr 2002, 0:00 | | Square One Solutions Group Limited - Audited Resu |
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SQUARE ONE SOLUTIONS GROUP LIMITED
Registration number 1999/026822/06
Share code : SQE
ISIN Code : ZAE000023768
("Square One" or "the Group")
Audited results
for the year ended 31 December 2001
Income Statement
2001 2000
R'000 Audited Audited
Revenue 158 968 122 996
Operating profit before
exceptional items 4 832 6 070
Net finance costs (2 841) (2 282)
Profit after finance cost and before
exceptional items 1 991 3 788
Exceptional items (10 524) -
Net (loss)/profit before taxation (8 533) 3 788
Taxation - (255)
Net (loss)/profit after taxation (8 533) 3 533
Attributable to outside shareholders (5) -
(Loss)/earnings attributable
to shareholders (8 538) 3 533
Headline (loss)/earnings calculation
Net (loss)/profit after taxation (8 533) 3 533
Goodwill write-off 6 938 -
Goodwill amortisation - 193
Profit on vehicle disposal (16) -
Headline (loss)/earnings (1 611) 3 726
Severe devaluation of SA Rand 3 586 -
Headline earnings adjusted for
severe devaluation of SA Rand 1 975 3 726
Headline earnings per share 2001 2000
Headline earnings per share adjusted for
severe devaluation of SA Rand 8.9 cents 16.9 cents
Headline earnings per share -7.3 cents 16.9 cents
Earnings per share
Earnings per share -38.8 cents 16.0 cents
Headline earnings per share and earnings per share are calculated on the
weighted average number of ordinary shares in issue being 22 000 000, during
both 2000 and 2001.
Balance sheet
2001 2000
R'000 Audited Audited
ASSETS
Non-current assets 2 684 4 261
Furniture and equipment 2 684 2 309
Goodwill - 1 952
Current assets 62 056 62 260
Inventories 22 449 25 027
Accounts receivable 38 411 36 376
Bank and cash balances 1 196 857
Total assets 64 740 66 521
Equity and Liabilities
Issued capital 9 020 9 020
Non-distributable reserve 63 -
Accumulated loss/retained income (5 005) 3 533
Outside shareholders' interest 1 567 -
Outside shareholders' loans 365 723
Long-term liabilities 1 588 1 487
Current liabilities 57 142 51 758
Accounts payable 34 739 31 470
Taxation 221 221
Current portion of long-term
Liabilities 275 589
Bank overdrafts 21 907 19 478
Total equity and liabilities 64 740 66 521
Cash flow statement
R '000 2001 2000
Net outflow from operating activities (1 372) (3 330)
Net outflow from investing activities (1 290) (4 166)
Net inflow/(outflow) from financing
activities 572 (844)
Net decrease in cash (2 090) (8 340)
Cash at beginning of period (18 621) (10 281)
Cash at end of period (20 711) (18 621)
Statement of changes in equity
R '000
Share Share Retained Non-distributable Capital and
capital premium income reserve reserves
Balance
31 December
2000 220 8 800 3 533 - 12 553
Revaluation
reserve 63 63
Deficit for
period (8 538) (8 538)
Balance at
31 December
2001 220 8 800 (5 005) 63 4 078
Commentary
Financial and operational review
The severe devaluation of the rand, adverse trading conditions resulting, in
part, from the September 11 terrorist attacks, limited local CAPEX spending,
and serious supply shortages from a major vendor were all issues that Square
One had to address during the 2001 year. Despite these issues, in the latter
part of the year the majority of the group's sales divisions achieved their
performance and revenue targets with some notching up sales milestones. The
group also turned around a half-year loss of
R1.4-million into an operating profit before exceptional items.
The severe devaluation of the rand towards the end of 2001 resulted in an
unrealised loss of R3.6-million. As a result of the recovery of the rand in
the first quarter of 2002, unrealised foreign exchange profits have arisen
which partially offset the unrealised losses accounted for at year-end.
The group has taken a conservative approach to all intangible assets this
year, and has written down their value to nil. Prospects for these group
companies to which this goodwill applies still remain good. Even taking the
full write down now, the group will be able to fully realise the value of
these acquisitions into the future.
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.
Revenue increased by 29 percent to R159-million over last year's R123-
million. The growth in revenue enabled the group to transform the headline
loss reported in the half-year, into an operating profit before exceptional
items at the end of 2001. This was despite the severe devaluation of the
Rand.
The benefits of Square One's expense-management reduction programme over the
last four months of 2001 were realised almost immediately, offsetting other
factors contributing to the decline in profitability. Centralising
operations proved invaluable and the continued focus on people will be a
crucial ongoing effort. Ongoing reduction of costs and inventory levels is
key.
Sourcing of certain product lines remained a problem throughout the year due
to supplier restructuring and events worldwide. The group's strategy to
reduce and limit product dependency was realised through the group's
restructuring. Both storage and consumables have become strong and viable
revenue generators. Further pluses include several technologies maturing to
the point where they can deliver on some long-promised benefits.
Best business practices have been established to develop strategic
relationships with suppliers of both products and services that are
important to the group's profitability.
Square One's purchase of a majority shareholding in uninterruptible power
supply company, UPScom, was rewarded through good sales growth - evidence of
a sound existing customer base and its excellent pending and active tender
prospects within the government, parastatal and corporate markets, as well
as the reliability of the company's comprehensive and robust product line-
up.
The group's stated strategy of global expansion started in early 2001 with
Square One's acquisition of a majority interest in the largest Xerox-
Tektronix reseller in Australia. This company made a pre-tax contribution of
R264 000 in its first year.
No dividends were recommended or declared for the period under review.
Outlook
On both the hardware and software side of the business, Square One is in the
process of achieving its stated objective of realising its consulting,
integration and skills services side, which includes the application of
biometric-based IT security technology.
The impending legislation that will make date information detail mandatory
on products for both local and export use was not promulgated in 2001, as
expected. This legislation is still expected to have a significant impact on
anticipated coding and marking revenues within South Africa's manufacturing
sectors, in line with international trends. Square One's coding and marking
division is still seen as an untapped revenue source with excellent
prospects.
Square One has demonstrated that its positioning in high-growth sectors in
the communications and information technology (CIT) solutions environment
will ensure sustained growth in revenue, which should translate into
improved earnings in 2002.
The directors are optimistic about Square One's medium- to long-term
prospects within the CIT sector.
By order of the board
Garth Coetser Trevor James Sandton
Chairman Chief Executive Officer 2 April 2002
Registered address
34 Monkor Road, Randpark Ridge,
Randburg, 2194
(PO Box 1757 Northcliff 2115)
Physical 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
Sponsor
Bridge Capital Services (Pty) Ltd
PO Box 651010, Benmore 2010
