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Square One Solutions Group Limited - Reviewed Interim Results
Release Date: 26/09/2003 17:05:01 Code(s): SQE
SQUARE ONE SOLUTIONS GROUP LIMITED - REVIEWED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2003
SQUARE ONE SOLUTIONS GROUP LIMITED
Registration number 1999/026822/06
Share code: SQE ISIN: ZAE000023768
REVIEWED INTERIM RESULTS
for the six months ended 30 June 2003
BALANCE SHEETS
as at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
R"000 Reviewed Audited Audited
ASSETS
Non-current assets 2 353 2 749 2 691
Fixed assets 2 199 2 713 1 918
Investments 16 16 16
Loans receivable 20 20 20
Deferred tax 118 - 757
Current assets 37 703 63 450 51 293
Inventories 16 190 22 106 19 099
Accounts receivable 20 666 40 264 31 001
Bank balances 847 1 080 1 193
Total assets 40 056 66 199 54 004
EQUITY AND LIABILITIES
Issued capital 9 020 9 020 9 020
Retained income (3 526) (1 644) (4 901)
Outside shareholders" interest 476 1 383 361
Outside shareholders" loans 365 365 365
Long-term liabilities 1 613 1 013 1 305
Non-distributable reserve - 95 -
Current liabilities 32 108 55 967 47 854
Accounts payable 10 820 34 620 25 629
Taxation 33 - 33
Short-term loans 845 - -
Current portion of long-term
liabilities 45 99 199
Bank overdraft 20 365 21 248 21 993
Total equity and liabilities 40 056 66 199 54 004
ABRIDGED CASH FLOW STATEMENTS
for the six months ended 30 June 2003
Six months Six months 12 months
to to to
30 June 30 June 31 December
2003 2002 2002
R"000 Reviewed Audited Audited
Net flow from operating activities 2 017 1 180 4 120
Net flow from investing activities 159 (409) (3 850)
Net flow from financing activities (894) (228) (359)
Net increase/(decrease) in cash 1 282 543 (89)
Cash at beginning of period (20 800) (20 711) (20 711)
Cash at end of period (19 518) (20 168) (20 800)
INCOME STATEMENTS
for the six months ended 30 June 2003
Six months Six months 12 months
to to to
30 June 30 June 31 December
2003 2002 2002
R"000 Reviewed Audited Audited
Turnover 36 647 88 738 174 196
Operating profit 4 087 4 934 13 327
Net finance costs (1 958) (1 757) (3 345)
Profit after finance costs and
before exceptional items 2 129 3 177 9 982
Exceptional items - - (8 221)
Profit before taxation 2 129 3 177 1 761
Taxation 639 - (1 296)
Net profit after tax 1 490 3 177 465
(Profit)/Loss attributable to
outside shareholders (115) 184 (361)
Net profit attributable to
ordinary shareholders 1 375 3 361 104
EARNINGS PER SHARE
Earnings per share (cents) 6,3 15,3 0,5
Headline earnings per share
(cents) 6,3 15,5 37,8
Earnings per share is calculated
by using the relevant attributable
profits and issued shares.
Reconciliation of earnings
per share
Attributable profit 1 375 3 361 104
Goodwill - 37 4 352
Loss on disposal of foreign
subsidiary - - 3 868
Headline earnings 1 375 3 398 8 324
Number of issued shares 22 000 000 22 000 000 22 000 000
STATEMENT OF CHANGES IN EQUITY
Capital
Share Share Distributable and
R"000 capital premium reserves reserves
Balance 31 December 2002 220 8 800 (4 901) 4 119
Surplus for period - - 1 375 1 375
Balance 30 June 2003 220 8 800 (3 526) 5 494
NOTE:
The interim statements have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice and the accounting policies
used in the preparation of these interim results are consistent with those
applied in the previous reporting period.
COMMENTARY
The group"s primary focus is the provision of IT-based business enabling
solutions. The group focuses primarily on the corporate, small medium enterprise
(SME) and Government markets whilst its aim is to create maximum value through
solutions in enhancing flexibility and mobility in the workforce.
The group"s value-based offerings are centred on:
* Biometric authentication solutions
* Integrated wireless and mobile applications
* Enterprise storage and backup/ recovery solutions
* Enterprise power solutions
* Coding and marking solutions
* Enterprise LAN, WAN and infrastructure solutions
* Channel and professional services
The group"s energies are channelled into providing niche solution offerings. The
group has a national footprint and more than 17 years" experience in the South
African market and has developed specific expertise in emerging technologies.
Square One is in the privileged position of being able to provide full turnkey
solutions through a well-developed eco-system of partners.
Square One continues to enhance and maintain its established channel business
with a strong focus on the distribution of key document solution offerings,
colour input and output devices, supported by a 24 x 7 national support and
service operation.
Financial review
The directors report that while revenues have decreased by 59% to
R36 647 million the operating profit has decreased by only 17%. The strategic
decision to exit the high-volume, low-margin distribution business and to focus
on value-add high-margin business is largely responsible for the reduction in
the turnover. This directly reflects the value of the company"s rightsizing and
re-alignment strategy, in an effort to create improved efficiencies in its
channel business, whilst adding incremental revenues through the continued
development of its solutions arm.
There has been a reduction in the investment of inventory coupled to the
reduction in high volume low margin related business. The overall improvement in
working capital has had a marginally positive effect on the net cash flow
position. The group"s dependency on short-term bank funding still impacts on the
its overall profitability due to the high cost of this funding.
Strategic developments
An improved customer relationship management drive has resulted in the
organisation being ideally positioned to provide enhanced services delivery to
its existing and prospective customer base.
Square One is pleased to report that its relationships with suppliers in the
channel business, both local and international, continue to strengthen. This
serves to improve overall competitive advantage in a marketplace that could be
seen to be "well-traded".
In line with the group"s stated intent in 2002 to enhance its primary focus
in the provision of IT-based business enabling solutions, the group formally
launched its enterprise solutions business in early 2003. The focus of this
business is to assist existing and prospective customers in maximising their
current investment in technology, whilst assisting them in leveraging any future
investments they may make in an attempt to better enable their businesses. The
aim of this is to allow customers to concentrate on their core business while
maximising the value of rapid, on-demand, reliable and constant access to
information.
The group has negotiated national partner agreements with leading
integrators, securing associations that will provide full turnkey solution
offerings to its customers.
The group"s national service and support arm is expected to address customer
requirements across the full gambit of Square One"s offerings. The period under
review saw the launch of a number of new service initiatives and offerings.
These include the group"s ServuCare programme in the Coding and Marking
solutions business and PowerCare for all users of uninterruptible power
supplies. These preventative maintenance programmes join the extremely
successful ServiceCare initiative developed by Square One on its printing
products some time ago.
Prospects
Square One has a pipeline of excellent business prospects and the directors
expect to see growth in headline earnings in line with sales objectives for the
year ahead.
Square One remains a team of early adopters, with leading edge, niche
solution offerings that are setting benchmarks both locally and in other areas
of the world.
The directors believe that this year will again prove the trend of the second
half of the year, being much better for Square One than the first.
Joint Cautionary Announcement
Shareholders are referred to the Joint Cautionary Announcement published on 3
September 2003 by Square One Solutions Group Limited and Labat Africa Limited
advising that the companies have entered into discussions, which may have an
effect on the prices at which the Square One and Labat shares trade on the JSE
Securities Exchange South Africa.
AUDITORS" REVIEW REPORT
The interim statements have been reviewed by the group"s auditors, Russel
Bedford Southern Africa (Jhb), Inc. The audit report is available for inspection
at the registered office of Square One.
DECLARATION OF DIVIDEND
The board has prudently decided not to declare a dividend.
On behalf of the board
G A Coetser
Chairman
W T James
Chief Executive Officer
Sandton
29 September 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 Limited
PO Box 61051, Marshalltown 2107
SPONSOR
Bridge Capital Services (Pty) Ltd
SQUARE ONE SOLUTIONS GROUP LIMITED
Registration number 1999/026822/06
Share code: SQE ISIN: ZAE000023768
www.sq1.co.za
