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Square One Solutions Group Limited -
Square One Solutions Group Limited
Registration number 1999/026822/06
Share code: SQE ISIN: ZAE000023768
AUDITED Results for the year ended 31 December 2002
INCOME STATEMENT
2002 2001
R"000 Audited Audited
Turnover 174 196 158 968
Operating profit 13 327 4 832
Net finance costs (3 345) (2 841)
Profit after finance costs and before
exceptional items 9 982 1 991
Exceptional items (8 221) (10 524)
Net profit/(loss) before tax 1 761 (8 533)
Taxation (1 296) -
Net profit/(loss) after tax 465 (8 533)
(Profit)/loss attributable to outside
shareholders (361) (5)
Net profit/(loss) attributable to
ordinary shareholders 104 (8 538)
HEADLINE EARNINGS
R"000
Net profit/(loss) after taxation 104 (8 533)
Goodwill amortisation 4 352 6 938
Loss on foreign subsidiary disposal 3 868 -
Profit on fixed asset disposal - (16)
Headline earnings/(loss) 8 324 (1 611)
Severe devaluation of SA Rand - 3 586
Headline earnings adjusted for
severe devaluation of SA Rand 8 324 1 975
ABRIDGED CASH FLOW STATEMENT
R"000 2002 2001
Net flow from operating activities 4 120 (1 372)
Net flow from investing activities (3 850) (1 290)
Net flow from financing activities (359) 572
(89) (2 090)
Cash at beginning of year (20 711) (18 621)
Cash at end of year (20 800) (20 711)
STATEMENT OF CHANGES IN EQUITY
Distribu- Capital
Share Share table and
R"000 capital premium reserves reserves
Balance 31 December 2001 220 8 800 (5 005) 4 015
Surplus for year - - 104 104
Balance 31 December 2002 220 8 800 (4 901) 4 119
Balance sheet
31 December 31 December
2002 2001
R"000 Audited Audited
ASSETS
Non-current assets 2 691 2 684
Fixed assets 1 918 2 684
Investment 16 -
Deferred tax 757 -
Current assets 51 313 62 056
Inventories 19 099 22 449
Accounts receivable 31 021 38 411
Bank balances 1 193 1 196
Total assets 54 004 64 740
EQUITY AND LIABILITIES
Issued capital 9 020 9 020
Accumulated losses (4 901) (5 005)
Ordinary shareholders" funds 4 119 4 015
Outside shareholders" interest 361 1 567
Outside shareholders" loans 365 365
Long-term liabilities 1 305 1 588
Non-distributable reserve - 63
Current liabilities 47 854 57 142
Accounts payable 25 629 34 739
Taxation 33 221
Current portion of long-term
liabilities 199 275
Bank overdraft 21 993 21 907
Total equity and liabilities 54 004 64 740
Earnings per share
Earnings per share of 0,5 cent are calculated by using attributable profit of
R104 000 and issued shares of 22 000 000.
Headline earnings per share of 37,8 cents are calculated by using attributable
headline profit of R8 324 000, which includes goodwill of R4 352 000 and loss on
disposal of a foreign subsidiary of R3 868 000 and issued shares of
22 000 000.
During the year under review, Square One Solutions Group increased turnover
by 10% to R174 million and headline earnings increased from a loss of R1,6
million to a profit of R8,3 million, despite the drop in IT and corporate
spending on the traditional goods and services supplied by Square One to its
chosen target markets. This increase in revenue and profitability was primarily
due to its authentication and security division realising the first of the
group"s identity verification biometric solutions. The division took a key role
in the consortium-driven implementation of a voter registration system in an
African country holding its first truly democratic election.
The operating profit of R13,3 million represents an increase of 176% compared
with 2001. Due to the partial recovery of the Rand, the company was able to
contain pricing increases and improve the competitiveness of its offering to
market. While the results are in line with what was projected, additional
revenues were realised from areas where there has been investment in new client
solutions-based initiatives.
The exceptional items consist of the amortisation of goodwill and a loss on
the disposal of Square One"s foreign subsidiary in Australia.
The increase in finance charges was primarily due to the increase in interest
rates during 2002.
Square One"s continued strategy towards excellence in customer service saw
the company establishing new branches in Bloemfontein and Pretoria.
The traditional distribution side of the business now represents far less of
the group"s revenues and contribution in line with our vision to become a
solutions-based operation. This side of the business made a considerable effort
in 2002 to manage its relationship with the reseller channel, striving towards
better business processes, from sales through to receivables management. It is
our intention to continue this process in 2003.
While Square One remains a key provider of the Xerox product range of colour
printers into the South African market, it also successfully secured the
distribution for complementary products from Epson. This enables the group to
take to market a broader line-up of best-of-breed colour input and output
devices.
Square One"s Power Solutions subsidiary (formerly UPScom) showed consistent
growth during 2002. This division secured several additional blue chip accounts
in the year under review.
Since the launch of the Integrated Retail Solutions division in 2002, we have
seen a steady growth in the number of projects relating to the provision of our
in-store ticketing and signage solutions. Through key alliances with Episys,
Nordic ID and Extech, the division is now well-positioned to offer the South
African retail market the finest back-office and point-of-sale retail solutions.
We expect to see a significant contribution to our revenues in 2003.
Roland Wilk and Deon Bothma resigned from the board during 2002 to pursue
their own business interests off-shore. Reginald Muzariri was appointed to the
board during the year under review. We expect to make new appointments in
strategic executive positions in 2003.
Outlook
Square One"s prospects outside the South African borders look set to grow at
a highly promising rate. These prospects fall within the auspices of our
Authentication division and surround the application of Square One"s solutions-
based technologies. They will enhance the distribution side of the business, as
well as creating the opportunity for worthwhile annuity service and support
income.
The Authentication division has also been working for some time with key
local partners on several highly strategic projects that should realise
excellent revenues and profits in 2003 and beyond.
We are starting to realise the growth curve in our Coding and Marking division
as product marking legislation looms ever nearer and business begins to adopt
the benefits of date coding in terms of effective product manufacturing,
management and marketing.
We have not yet realised the investment and full potential in mid-range
storage demands. This will be a key focus area in the new year. We are now also
well-positioned to address the massive potential we see in biometric-based
authentication and other security solutions.
The statements have been prepared in accordance with South African Statements
of Generally Accepted Accounting Practice. The financial information detailed in
this report has been audited by Russell Bedford Southern Africa. The auditors
have issued an unqualified audit report. The audit opinion is available for
inspection at the company"s registered office.
Dividends
No dividends are recommended or declared for the year under review.
On behalf of the board
G A Coetser
Chairman
W T James
Chief Executive Officer
Sandton
31 March 2003
Registered address:
Eastgate Park, 8 Commerce Crescent West
Eastgate Extension 13, Sandton,
(PO Box 1163, Gallo Manor 2052)
Telephone: (011) 321-5900
Telefax: (011) 444-2462
Transfer secretaries:
Computershare Investor Services Limited
PO Box 61051
Marshalltown 2107
SQUARE ONE SOLUTIONS GROUP LIMITED
Registration number 1999/026822/06
Share code: SQE ISIN: ZAE000023768
www.sq1.co.za
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