Square One Solutions Group (SQE), the applied technology solutions provider, has announced solid results, indicative of sustained growth for the year to end December 2007. The group reported attributable and headline earnings of R5.3-million and R4.97-million, an improvement of 50.2% and 40% respectively, over earnings for 2006.
Revenue from annuities achieved by the Group, listed under the “Software and Computer Services” sector of the JSE Main Board, increased from 10% to 25% of turnover, reflecting an improvement in the qualitative nature of the business as a whole.
”Square One has effectively completed the transition to its diversified business model,” says chief executive Craig Alexander. “The Group aims to implement its strategic intent to dominate the markets in which it currently operates, while simultaneously expanding into new markets through organic and acquisitive growth.”
Operating profit increased 25% year on year, despite a 5% decline in turnover. This is primarily due to the company’s change in focus, transitioning from low margin distribution business to high margin, turnkey solutions for customers. The net effect translates into an increase in annuity, predictability and sustainability of current and future income streams.
Profitability is expected to continue to improve during 2008, both through strong, sustainable organic growth, as well as strategic acquisitions, which are either in progress or targeted over the next 12 to 18 months.
Cash flow from operating activities is in line with the profitability of the group. Cash movements in financing and investing activities primarily relate to acquisition activities.
Square One recently acquired a leading player in the infrastructure, electrical and facility-related business, namely Structured Infrastructure Solutions (Pty) Ltd (SIS) for a consideration of R12,5-million as part of its strategy to drive growth and compete in higher value, higher margin business areas. The purchase of SIS sets up a R60-million a year infrastructure, electrical, cabling and power solutions business that has the potential to grow to R100-million during 2008.
“During the 2007 financial year, Square One’s new business operations have come into their own and will be the foundation for the future of the group,” says Alexander. “Efficiencies unlocked through acquisitions concluded over the past four years, coupled with strong organic growth of the business are reflected this fiscal.”
The groundwork for the future has been firmly established, enabling the group to unlock greater profitability and continue to fulfil its ambition to dominate the industrial coding and marking, unified communications, electrical, infrastructural and facilities space, supported by the Group’s in-house rental and finance organisation, Square One Capital.
“The sound performance of the group is a testament to our people and the management team,” adds Alexander. “Looking forward, the financial outlook is bullish and we believe that our current growth rate is sustainable. We will continue to expand into new markets through a targeted acquisition strategy, coupled with solid organic performance.”