JSE-listed Square One Solutions Group could cease to exist at all if the liquidator decides to sell off its holdings in its operating entities later this month, bringing to an end 23 years in the ICT sector.
On 19 May, the company told shareholders it was applying for liquidation of the listed entity, at the same time suspending trade in its shares, because of its “precarious financial” situation.
The Johannesburg High Court has granted a provisional liquidation order, and is set to reconvene on 27 July, when liquidation is set to become final. The liquidation, however, only affects the listed entity, and some of the operating entities are still in business.
Liquidator Dawie van der Merwe, from Independent Trustees, says he was appointed as provisional liquidator last week. Currently, he is tasked with maintaining Square One's assets, which are limited to its stake in several operating subsidiaries.
Square One 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.
Van der Merwe says if the court finalises the provisional liquidation order on 27 July, he will then shift focus to look at how best to realise these assets, which could include selling Square One's stake in each company to other businesses.
“Only once the company is finally liquidated will we be able to consider the sale of the shares the company holds in its subsidiaries,” says Van der Merwe.
Still running
Square One CEO Trevor James says management of the subsidiary companies are working closely with the provisional liquidator to review underlying assets to decide what the best course of action is.
In addition, says James, some subsidiaries are still providing solutions to customers. “Where appropriate, these services and products are continuing unabated,” he says.
In some areas of the business, “employees have been placed on compulsory unpaid leave pending a review of those specific business units and action by the provisional liquidator”, he adds.
Financial woes
Square One's most recent results, for the year to December, showed it had cash on hand of R832 000, which is a slight improvement on the R634 000 it had at half-year. Although the company made R1.8 million from operations during the year, it has a net loss of R19 million.
The loss caused its auditors to express concern over the company's ability to continue operating. Despite the auditor's concerns, Square One told shareholders at the end of April - when it released its results - that the loss was because of a non-cash item and did not impact cash flow.
Square One said the loss-making subsidiary had 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 did not warn shareholders of its precarious financial situation, instead telling the market 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”.
In addition to its financial troubles, Square One is 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.
Square One shares last traded at 10c before the suspension came into effect.
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