JSE-listed Square One Solutions Group (SQE), the applied technology solutions provider, today announced pleasing results for the six months ending June 2007.
Annuity-based business increased significantly from approximately 10% to 25% of turnover, period on period, and operating profit for the half-year is in line with that of the comparable period, despite a 17% decline in revenue.
The group, listed under the "Software and Computer Services" sector of the JSE Main Board, reported R2.7 million in attributable earnings and headline earnings of R2.3 million.
"Earnings are in line with our budget, which has allowed for certain restructuring and integration costs following the acquisition of NETIntellect during the previous financial year," said Square One chief executive, Craig Alexander.
During the six months under review, the group issued shares for cash to a black economic empowerment (BEE) partner, which had a dilutive effect on earnings and headline earnings per share to 8.2 and 7.1 cents per share respectively. "It is expected that this relationship, along with our existing Proudafrique partnership, will provide Square One with a competitive benefit moving forward," added Alexander.
"To date, during financial year 2007/08, we have focused on growing our business both organically and through a value added acquisition strategy," he said. The 21-year-old group has, over the last four years, been focusing on diversifying into service and rental annuity business, which although reflecting a lower turnover, typically attracts higher gross margins and greater performance predictability.
"From a budgetary perspective, management is therefore pleased with this set of results for the six-month period. Furthermore, the integration of NETIntellect and its related costs have been absorbed during this period, with profitability now growing," said Alexander. "We are confident that our full year results expectations are well on track to being achieved."
The six months under review has also seen management effectively contain costs across the business. Over the comparable period, results indicate a 5% improvement in ongoing cost management. The changing nature of the business has also led to better working capital management.
This set of results highlights a substantial reduction of long-term liabilities, from R19.7 million to 14.2 million.
Cash flow from operating activities has moved into positive territory when compared to the six months ending June 2006. "We have applied a large proportion of cash held as at the end of the previous six months, to financing and investment activities," explained Alexander. "The net cash flow from operating activities has improved substantially and we have seen a critical turnaround on core cash flow items."
Looking ahead, the groundwork has been firmly established, thereby enabling Square One to unlock greater profitability and tie in sustainable annuity income for the group, in line with its strategic intent to diversify its business offering.
According to Alexander, Square One's core focus is on being a vertically-centric, applied technology solutions provider, which has seen it move away from being a pure distributor-based business. "This set of results indicates that, based on our strategic intent, we are exactly where we expected to be," concluded Alexander.
Click here to view Square One's balance sheet.
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Square One Solutions Group is listed on the Software & Computer Services sector of the JSE Limited. It focuses on providing vertically centric, applied technology solutions, has a national footprint and more than 21 years of experience in the South African market. Square One Solutions offers value-based solutions centred on infrastructure and facility solutions, policy solutions, industrial coding and marking solutions, tailored finance and leasing services to its key target market of enterprise, SME, corporate and government clients. The company also distributes document solutions, colour input and output devices and provides 24x7 national support and service. For more information, visit www.sq1.co.za.
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