A global economic slowdown and disruptions caused by Xerox's acquisition of the Tektronix colour printing and imaging division has led to an interim headline loss being incurred at Square One Solutions.
CEO James Trevor says this is despite the fact that most of the company's sales divisions achieved their performance targets for the six months to 30 June 2001, increasing revenue 32%.
"The impact of last year's international acquisition by Xerox of the Tektronix colour printing and imaging division has had an adverse effect on the supply of stock to Square One," Trevor says.
<B>Figures at a glance</B>
Square One Solutions results for the six months to 30 June 2001
Figures for the six months to 30 June 2000 in parentheses:
Turnover: R74.39m (R56.35m)
Operating profit: R21 000 (R2.05m)
Attributable profit: -R1.44m (R823 000)
Current assets: R53.64m (R44.91m)
Current liabilities: R48.06m (R35.76m)
Net flow from operating activities: R2.68m
"Deliveries on Xerox-Tektronix products were erratic and up to six months late, as a result of which sales for this six-month period were lower than the average monthly sales recorded in the previous financial year.
"A further contributing factor to the decline in profitability was Square One's efforts to satisfy customer demand for Xerox-Tektronix supplies and spare parts through sourcing these from elsewhere in the world at much reduced margins."
However, he adds that all the issues relating to the stock availability have been resolved, and the group's exclusive South African distribution contract has been extended to next year.
"The revenue generated from Xerox-Tektronix sales has traditionally accounted for approximately 50% of the group's earnings.
"However, for over two years the company has been actively pursuing a strategy to reduce and limit product dependency. The benefits of this are already evident. An example is the storage division that has grown from a nominal revenue base into a strong and viable revenue generator."
Trevor says impending legislation will make date information detail mandatory on products for both local and export use. "This is expected to have a significant impact on anticipated coding and marking revenues within SA's manufacturing sectors. Square One's wholly owned coding and marking division is still an untapped revenue area with excellent prospects."
He says the outlook for the remainder of the year is positive, and the group's positioning in high-growth sectors in the IT and information management solutions environment will ensure sustained revenue growth, which should see improved earnings next year.
Trevor expects a return to profitability in the fourth quarter.
The Square One share was trading 30c or 14.29% down at 180c on the JSE this morning.
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