JSE-listed niche technology provider Square One Solutions aims to double its revenue by 2009. However, it wants to grow bottom line profit at a faster rate.
CEO Craig Alexander says the company will achieve this through a combination of acquisitive and organic growth. "We are hungry to do good, sound acquisitions, partnerships and mergers for equity."
The company, which will shortly celebrate its 21st birthday, yesterday reported its annual results to end-December. It posted revenue of R171.8 million, against R204.6 million the previous year. However, earnings per share and headline earnings increased.
Alexander says this is in line with the company's strategy to target longer-term relationships with higher margins, than to operate on a purely volume-based level.
Shifting focus
The company has shifted focus since being established as a distributor in 1986 and now has three core elements. In 2003, it narrowed its focus as SA moved towards a liberalised telecommunications framework.
Alexander says some components of the business will be grown organically as the group beds down recent acquisitions. Others will be added to by buying companies that complement its existing offerings, he adds.
The company says its three core offerings are in the unified communications space, the bar coding and product marking space, and its finance division. The finance division, Square One Capital, is an offshoot from a black economic empowerment deal with Utho Investment Holdings. It allows clients to finance bar coding and related equipment.
Once this empowerment deal is complete, Square One will be 28% empowered. It has also sold equity to Proud Afrique. Alexander says each deal was done to add value to the company's offerings.
Growth ambitions
Within the bar coding space, which Alexander says the company also offers as an outsourced solution, it aims to offer more production-line solutions. "We want to acquire to own more of the production line."
After this, the company aims to grow into areas such as adding more value through management, improved efficiencies and service-level agreements. By 2012, he says, the company will have moved to a more vertical operating level.
Channel sales currently make up a third of its revenue. Four years ago, such sales made up the bulk of the company's revenue. By the end of 2007, this figure will be at 22%.
While consolidating acquisitions in the unified communications space, it will look for bolt-on acquisitions that can add to the infrastructure offerings within this division. In addition, says Alexander, with the changing electricity needs in SA, the company hopes to benefit from a need to plan ahead. It will seek to push its UPS and related products locally and on the continent.
Square One recently partnered with a Kenyan firm to push electricity-related infrastructure products on the continent. To grow the capital division, Alexander says it will look at acquiring firms to complement its skills base.
The company's shares closed unchanged at R1.26 yesterday. Alexander points out the shares are tightly held, with little liquidity. This, he says, is a positive, as it is one factor that could avoid the group becoming an acquisition target.
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