JSE-listed Square One Solutions Group has filed for liquidation and asked the Johannesburg bourse to suspend trade in its shares, bringing to an end 10 years as a listed entity.
Yesterday afternoon, the company, which is the target of a R3.3 million legal claim, told the market it would apply for liquidation of the listed holding company at the South Gauteng High Court in Johannesburg on 25 May. It says this is because of its “precarious cash flow situation”.
CEO Trevor James says the liquidation only affects the listed entity, which had two staff members, and the subsidiary companies will continue to trade. He did not explain whether this would be under an umbrella company, or whether the entities would go their own way.
The staff members were James and former chairman Garth Coetser, who stepped down the day before handing himself over to police after learning he was wanted in relation to a tax scam. Square One has since distanced itself from Coetser.
Square One, which was founded in 1986 and listed in 2000, has several operating entities that will continue to run. It owns all of Structured Infrastructure Solutions, Square One Technology Solutions, Square One Managed Services, Square One Group Operations, Square One Solutions and 51% of Square One Capital.
Misplaced optimism
Square One's most recent results, for the year to December, showed it had cash on hand of R832 000, an improvement on the R634 000 it had at half year. The company generated R1.8 million from operations during the year and was cash positive at the end of the year.
However, its auditors drew attention to the fact that it incurred a net loss of R19 million during the year. The auditors expressed concern over the company's ability to continue operating.
At the time, at the end of April, Square One assured shareholders that the losses related to a non-cash item, which did not impact cash flow, and a loss-making subsidiary that had since been sold. “As the loss-making subsidiary has been disposed off, we believe that the potential future drain on the group has been curtailed,” Square One said.
The company pointed out that the remaining businesses had achieved headline earnings after tax of R746 000 and were trading profitably. In addition, the group's shareholders continued to provide working capital support “as and when required and this is expected to continue should it be required”.
Square One added that it was “experiencing a healthy increase in demand and growth in orders and is expected to manage to meet its operational requirements in the normal course of business”.
James told ITWeb at the time that there were plans in place to turnaround the loss. “Early indications are there that 2010 should be a year of positive growth, and the fundamentals and state of contracts are all healthy. Square One's existing business is still profitable.”
Legal battles
The company was being sued by UK-based Domino Printing for £285 683 - or R3.3 million - in outstanding invoices and, in turn, was suing Domino for R9 million for loss of income. The company disclosed the legal action in an update to shareholders this month, correcting a previous statement that said it was not involved in any litigation.
The locally-listed organisation has a market capitalisation of R4.4 million, making both claims material as they are above 5% of the value of the firm's shares in issue.
This is not the only legal squabble Square One was involved in recently. Last month, ITWeb revealed that one of its former subsidiaries had been liquidated, because it did not pay suppliers.
At the end of March, Square One Pty was liquidated in the Johannesburg High Court, after an application by Bloemfontein-based closed corporation JE Homecare and Civils. JE Homecare was owed about R400 000 for a cabling contract it had undertaken for Square One, on behalf of Telkom.
Last year, the company was sued by Agang Cables for R1 million, after CEO Deon du Plessis claimed the listed group owed him close on R1 million for work he had done for it.
The entire matter was dropped by Agang, last October, but reasons for withdrawing the court case were never disclosed. Square One denied it owed the company money, saying the deal was between Structured Networks and Agang.
Square One shares closed flat yesterday at 10c before the suspension came into effect.
Related stories:
Square One's profit turns to loss
Square One in legal squabble
Share