| Thu 30 Mar 2006, 16:39 | | Square One - Audited results for the year ended 31 |
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SQE
Square One - Audited results for the year ended 31 December 2005
SQUARE ONE SOLUTIONS GROUP LIMITEDRegistration number 1999/026822/06
Share code: SQE
ISIN: ZAE000023768
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005
BALANCE SHEETS
31 December 31 December
2005 2004
R"000 Audited Audited
ASSETS
Non-current assets 19 733 19 776
Fixed assets 1 493 944
Intangible assets 10 151 9 633
Investment - 16
Loans receivable 14 -
Deferred tax 8 075 9 183
Current assets 66 611 47 166
Inventories 18 397 16 782
Accounts receivable 42 530 28 575
Bank balances 5 684 1 809
Total assets 86 344 66 942
EQUITY AND LIABILITIES
Issued capital 13 726 9 020
Accumulated losses (1 758) (3 003)
Ordinary shareholders" funds 11 968 6 017
Outside shareholders" interest 686 686
Outside shareholders" loans 271 246
Long-term liabilities 19 462 25 109
Current liabilities 53 957 34 884
Accounts payable 49 125 29 672
Taxation 4 119
Current portion of long-term liabilities 4 030 3 711
Provisions 798 1 381
Bank overdraft - 1
Total equity and liabilities 86 344 66 942
EARNINGS PER SHARE
2005 2004
Earnings per share (cents) 5.3 2.5
Headline earnings per share (cents) 9.4 3.6
Earnings per share is calculated by using
the relevant attributable profits and
issued shares.
Reconciliation of earnings to headline
earnings
Attributable profit 1 245 556
Impairment of goodwill 976 886
Negative goodwill written off - (652)
Headline earnings 2 221 790
Number of issued shares 23 641 22 000
NOTE:
The statements have been prepared in accordance with International Financial
Reporting Standards (IFRS) and the accounting policies used in the preparation
of these results are consistent with those applied in the previous reporting
period. These results have been audited by Russell Bedford Southern Africa (Jhb)
Inc. The Audit Report is available for inspection at the Company"s registered
office.
INCOME STATEMENTS
2005 2004
R"000 Audited Audited
Turnover 204 653 144 338
Operating profit before impairment of 6 502 2 774
goodwill
Impairment of goodwill (976) (886)
Net finance costs (3 093) (1 807)
Net profit before tax 2 433 81
Taxation (1 188) 657
Net profit after tax 1 245 738
Profit attributable to outside - (182)
shareholders
Net profit attributable to ordinary 1 245 556
shareholders
ABRIDGED CASH FLOW STATEMENTS
2005 2004
R"000 Audited Audited
Net flow from operating activities 2 955 2 868
Net flow from investing activities 3 208 (2 316)
Net flow from financing activities (2 287) 555
Increase in cash and cash equivalents 3 876 1 107
Cash at beginning of period 1 808 701
Cash at end of period 5 684 1 808
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 (3 003) 6 017 686 6 703
January 2005
Shares issues 61 4 645 4 706 4 706
Surplus for the 1 245 1 245 1 245
year
Balance at 31 281 13 445 (1 758) 11 968 686 12 654
December 2005
COMMENTARY
NATURE OF BUSINESS
Square One is an information technology company listed under the "Software and
Computer Services - Computer Services" Sector of the JSE Limited. 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 IP infrastructure solutions, policy solutions, power solutions, product
coding and marking solutions, mobile and wireless solutions, storage,
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.
Square One boasts 20 years of business experience with national representation.
The operations of the Group are made up of four primary business units - Coding
and Marking, Channel Services, Square One Capital and Business Solutions,
incorporating IP Infrastructure, Policy Solutions and Power and Facilities.
Square One has, since inception, partnered with businesses that are market
leaders who offer world class brands or have significant technological
advantages to benefit the Group"s strategy. The Group focuses on coupling
innovation, technology and service in order to achieve value for its clients
while achieving superior returns and growth in earnings for its shareholders.
BUSINESS REVIEW
Headline earnings per share has increased by 161% for the financial year ending
31 December 2005 from 3.6 cents to 9.40 cents per share. Headline earnings are
calculated before the impairment of the goodwill charge to the income statement.
Earnings per share has increased by 112% for the same period from 2.5 cents to
5.3 cents per share.
The Group posted revenues of R204.7 million for the year under review against
R144.3 million in 2004, an increase of 42%. Operating costs decreased to R48.6
million in 2005 as a result of addressing better efficiencies and expense
control.
The Group posted operating profits of R6.5 million in 2005 compared to operating
profit of R2.8 million in 2004, an increase of 132%.
In terms of IAS and the new IFRS statements, the Group"s goodwill was reviewed
and an amount of R976 thousand was deemed to have been permanently impaired,
resulting in the Group writing off this amount in the 2005 financial year. In
the corresponding period in 2004, the impairment value was R886 thousand.
Net finance costs increased by R1.3 million from R1.8 million in 2004 to R3.1
million in 2005 due to higher working capital requirements.
Profit before tax is R2.4 million for the 2005 financial period compared to a
profit before tax of R81 thousand achieved in 2004.
Due to the associated increase in sales, inventory increased by R1.6 million to
R18.4 million and debtors increased by R13.9 million to R42.5 million in 2005.
Cash balances at the end of the 2005 financial year were R5.7 million compared
to R1.8 million in the 2004 financial year. Cross selling opportunities,
combined with the increased demand in our specialised offerings in the
Telecommunications sector, has ensured that sales have remained buoyant.
As a result of the above, current assets increased by R19.4 million over the
previous financial year.
Current liabilities increased by R19.1 million during the course of the 2005
financial year. The nett movement between current assets and current liabilities
resulted in an increase in working capital of R0.3 million.
The capital structure of the Group has strengthened in 2005. Capital and
reserves have increased from R6.9 million to R12.9 million, an increase of R6.0
million.
BLACK ECONOMIC EMPOWERMENT (BEE)
As announced on 6th February 2006 Square One concluded two simultaneous black
partnership transactions with Proudafrique Trading 66 (Pty) Ltd (Proudafrique)
and Utho Investment Holding (Pty) Ltd (Utho) respectively. In summary
Proudafrique acquired 6 220 000 Square One shares from GAC Investment Holdings
(Pty) Ltd, The Jartay Trust and The James Trust, representing a strategic
interest of 23,0% in Square One. In a separate transaction Utho will, subject to
obtaining the necessary shareholder approval, subscribe for 1 428 571 new Square
One shares at a price of 70 cents per share, representing a 4,8% interest in the
enlarged issued share capital. The net result of our black partnership
transactions will reflect a 31,9% black shareholding in Square One.
OUTLOOK
Due to the worldwide acceptance of IP (Internet Protocol) as the de facto
standard for connectivity, the prophesy of the ultimate "global village" from
both a business and consumer point of view, appears to be on the verge of being
fulfilled, dependant on the last few pieces of the puzzle falling into place.
It is clear that the entire concept of "Convergence" is not only the coming
together of diverse technologies such as Voice, Video, Data and Image, but maybe
more importantly, from a commercial viewpoint, the coming together of three
industries namely Telco/Internet Service Provider, Cellular and Media and
Entertainment. The pending convergence of these three industries gathers
momentum and is corroborated by the plethora press releases of mergers and
acquisitions taking place. The blurring of the lines between these three
industries is starting to create exciting market opportunities and the promise
of exciting new services in the offing.
As has become apparent, the aggressive roll out of broadband multimedia services
by Telcos and Internet Service Providers has begun, with many of them projecting
2007 onwards as their date to have their entire infrastructures operating over
IP technology, be it voice, video, image or data. The arrival of the Second
Network Operator (SNO), who is likely to enter the market with an IP-based
broadband network, will hasten this process by pure competitive reality.
It is therefore no surprise that the IT industry at large is gearing itself up
for the next revolution borne out of evolution - a "so-called" Intelligent
Evolution!
Having anticipated the deregulation of the South African market nearly three
years ago Square One is in a good position to capitalise on the deregulated
environment and has positioned itself to take full advantage of these dramatic
changes. The market continues to see the increase in market demand for
Information Technology solutions and Square One continues to focus on the
corporate market in establishing itself as a key solutions provider, having won
a number of strategic accounts this past year.
Our underlying foundation for value creation will continue to be focused on the
individual components of improving returns, expanding organically and acquiring
incrementally. Our strategy has been in place for just over three years and it
involves:
* Continually improving the performance of our existing businesses based on
increasing customer intimacy and achieving "Operational Excellence".
* Incremental acquisitions in our areas of competence and disposals of product
which do not fit our long-term goal of building value.
* Organic expansion into new geographic areas, markets and the addition of
complementary products and services to serve our clients" needs.
In the 2006 report we expect to be able to report further progress in these key
components of our strategy as well as other initiatives in order to derive
maximum value for our staff, shareholders, customers, and our partners.
On behalf of the board.
G A Coetser
Chairman
R T MuzaririVice-Chairman
W T JamesChief Executive Officer
Sandton30 March 2006
REGISTERED ADDRESS34 Monkor Drive, Randpark Ridge, 2156(PO Box 1163, Gallo Manor
2052)Telephone: (011) 321-5900Telefax: (011) 444-2462
TRANSFER SECRETARIESUltra Registrars (Pty) LtdPO Box 4844, Johannesburg 2000
SPONSORBridge Capital Services (Pty) LtdPO Box 651010, Benmore, 2010
Directors: G A Coetser* (Chairman), C L Alexander, W T James (Chief Executive
Officer), Prof S Makanya*, R R Masebelanga* (Deputy Chairman),A Meyer, R T
Muzariri (Vice Chairman), M G Seape*, K X T Socikwa*
(*Non-executive)
SQUARE ONE SOLUTIONS GROUP LIMITED
Registration number 1999/026822/06
Share code: SQE
ISIN: ZAE000023768
www.sq1.co.za
Date: 30/03/2006 04:39:13 PM Produced by the JSE SENS Department
