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Square One Solutions Group Limited - Audited Results For The Year Ended 31
Release Date: 31/03/2005 17:26:24 Code(s): SQE
Square One Solutions Group Limited - Audited Results For The Year Ended 31
December 2004 And Cautionary Announcement
SQUARE ONE SOLUTIONS GROUP LIMITEDRegistration number 1999/026822/06
Share code: SQE
ISIN: ZAE000023768AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 AND
CAUTIONARY ANNOUNCEMENT BALANCE SHEETS
31 December 31 December
2004 2003
R`000 Audited Audited
ASSETS
Non-current assets 19 776 13 892
Fixed assets 944 1 327
Intangible assets 9 633 8 922
Investment 16 16
Deferred tax 9 183 3 627
Current assets 47 166 44 734
Inventories 16 782 15 245
Accounts receivable 28 575 28 620
Taxation - 30
Bank balances 1 809 839
Total assets 66 942 58 626
EQUITY AND LIABILITIES
Issued capital 9 020 9 020
Accumulated losses (3 003) (3 559)
Ordinary shareholders` funds 6 017 5 461
Outside shareholders` interest 686 503
Outside shareholders` loans 246 365
Long-term liabilities 25 109 20 859
Current liabilities 34 884 31 438
Accounts payable 29 672 22 716
Taxation 119 -
Current portion of long-term 3 711 7 287
liabilities
Provisions 1 381 1 297
Bank overdraft 1 138
Total equity and liabilities 66 942 58 626
EARNINGS PER SHARE
2004 2003
Earnings per share (cents) 2,5 6,1
Headline earnings per share (cents) 3,6 7,8
Earnings per share is calculated by
using the relevant attributable profits
and issued shares.
Reconciliation of earnings per share
Attributable profit 556 1 342
Impairment of goodwill 886 369
Negative goodwill written off (652) -
Headline earnings 790 1 711
Number of issued shares 22 000 22 000
INCOME STATEMENTS
2004 2003
R`000 Audited Audited
Turnover 144 338 91 422
Operating profit 1 888 5 612
Net finance costs (1 807) (3 335)
Net profit before tax 81 2 277
Taxation 657 (793)
Net profit after tax 738 1 484
Profit attributable to outside (182) (142)
shareholders
Net profit attributable to ordinary 556 1 342
shareholders
ABRIDGED CASH FLOW STATEMENTS
2004 2003
R`000 Audited Audited
Net flow from operating activities 2 868 4 732
Net flow from investing activities (2 316) (9 873)
Net flow from financing activities 555 26 642
Increase in cash and cash equivalents 1 107 21 501
Cash at beginning of period 701 (20 800)
Cash at end of period 1 808 701
STATEMENT OF CHANGES IN EQUITY
Distribu-
Share Share table Minority Total
R`000 capital premium reserves Total interest Equity
Balance at 1 220 8 800 (3 559) 5 461 503 5 964
January 2004
Surplus for year 556 556 182 738
On acquisition 1 1
Balance at 31 220 8 800 (3 003) 6 017 686 6 703
December 2004
NOTE:The 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 results are consistent with those applied in
the previous reporting period.
COMMENTARY
NATURE OF BUSINESSSquare One is an information technology company listed under
the `Software and Computer Services - Computer Services` Sector of the JSE
Securities Exchange South Africa (`JSE`). Square One`s primary service focuses
on providing niche business-enabling solution offerings, which create value for
our clients through the application of business knowledge and best practices,
technological skills and capability.
The Group`s primary focus is the provision of value-based offerings centred
around biometric authentication, power solutions, product coding and marking
solutions, application and systems integration services, wireless and
infrastructure, storage, back-up recovery and telecommunications and service
provider solutions to its key target market of Enterprise, SME, Corporate and
Government clients. Channel Services continues to play an important role in the
Group and has a well-established and mature reseller channel.
BUSINESS REVIEW
In line with the broader IT industry beginning to show signs of growth, Square
One continues to make positive strides in all business units from a top line
revenue, gross margin and market share perspective.
New business units that were under development during 2004 have started to show
good sustainable growth, as acceptance from customers for our core solution
offering grows from strength to strength. Good results were also achieved
through all the existing founding business units of the Square One Solutions
Group.
The above growth and acceptance by our customers for solution offerings which
truly add quantifiable value to their businesses, is reflected in both our top
line revenue and gross margin contribution lines. Top line revenues increased
by 58% from R91 million to R144 million year-on-year and gross margin
contribution increased 79% year-on-year 2003/2004. The new lines of business
that the Group embarked upon in 2004 have begun to deliver sustainable
contributions which have resulted in lifting the gross profit as a percentage of
sales by an incremental 4%.
The process of seeking greater efficiencies in the business, through structured
improvement in systems and expense controls, continues to enjoy a high degree of
attention.
In order to fulfil on our strategic intent, two key acquisitions were made
during the financial year and the cost borne by the acquisitions is reflected in
the lower than desired bottom line achievement for the 2004 financial year.
The Group recorded a headline profit for the year of R790 000 after net
amortisation of goodwill of R234 000.
The directors view this result as a resilient performance during a year of much
change for the business and its staff.
The above results are in line with our strategic intent to balance the
contributions derived from the traditional offerings centred on the Square One
Power, Coding and Marking and Channels businesses as well as a growing
contribution from the new lines of business of Square One Business Solutions,
Square One Service Provider Solutions and Square One Application Services.
OUTLOOKWith a growing desire from customers to partner and seek value-based IT
services and solutions, the opportunity for niche integrators that are nimble,
flexible in structure and have the ability to adjust quickly to a very dynamic
market place is growing in strength.
The 2004 financial year sees Square One Solutions Group strengthen its position
as one such niche integrator. The Group fulfilled on its strategic and
structural transformation processes and enters the 2005 financial year with a
firm focus on its customers, its culture and the qualitative aspects of its core
business in the interests of providing value for customers, shareholders and
staff.
Pro-active `Customer satisfaction` and `Employee satisfaction` programs are
being instituted across all functional areas within the business.
Square One boasts 19 years of experience and a nationally represented business
that has a solid platform from which to continue its growth into 2005 and
beyond.
Whilst overall levels of activity in the IT industry continue to grow, budget
and spend patterns still remain lengthy and tight.
The Group enters the 2005 financial year confident in its ability that it is
well positioned to provide existing and new clients with a broad range of value-
based solutions and offerings whilst at the same time implementing the necessary
systems to increase efficiencies within the organisation. The management of
Square One will continue to restructure the back and front office operations in
order to support our strategic intent and overall value proposition.
In line with our strategy, we will continue to evaluate and seek new
opportunities to enhance our skills base and related business offerings through
organic means, as well as other initiatives in order to derive maximum value for
our staff, our customers, our shareholders and our partners.
AUDITORS REPORT
The statements have been audited by the group`s auditors, Russell 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.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the company has entered into negotiations, which,
if successfully concluded, may have a material effect on the price of the
company`s shares. Accordingly, shareholders are advised to exercise caution when
dealing in the company`s shares until a full announcement is made.
On behalf of the board.
G A Coetser
Chairman
R T Muzariri
Vice-Chairman
W T JamesChief Executive Officer
Sandton31 March 2004REGISTERED ADDRESS34 Monkor Drive
Randpark Ridge 2169
(PO Box 1163, Gallo Manor 2146)Telephone: (011) 321-5900Telefax: (011) 444-2462
TRANSFER SECRETARIESUltra Registrars (Pty) Ltd
PO Box 4844, Johannesburg 2000
SPONSORBridge Capital Services (Pty) LtdPO Box 651010, Benmore, 2010Directors: G
A Coetser* (Chairman), C L Alexander, B A Croza,W T James (Chief Executive
Officer), R R Masebelanga* (Deputy Chairman),A Meyer, R T Muzariri (Vice
Chairman), MG Seape*, KXT Socikwa*
*(Non-executive)www.sq1.co.za
