passion proactivity performance - sharedata · passion proactivity performance. contents vision 1...

A N N U A L R E P O R T 2 0 0 3

S Q U A R E O N E S O L U T I O N S G R O U P L I M I T E D

P A S S I O N P R O A C T I V I T Y P E R F O R M A N C E

CONTENTS

w w w. s q 1 . c o . z a

Vision 1

Salient Financial Highlights 1

Mission 1

Shareholders’ Diary 1

Preamble 2

Forward-looking Statements 2

Directorate and Administration 3

Board of Directors 4

Group Structure 4

Chairman’s Statement 5

Chief Executive Officer’s Review of Operations 7

Group Results 7

Operational Review 9

Outlook 13

Executive Team 15

Corporate Sustainable Development 16

Health 16

Environment 16

Employment Equity 16

Affirmative Action 16

Monitoring and Evaluation 16

Outsourcing, Joint Ventures and Subcontractors 17

Training and Development 17

Corporate Governance 18

Code of Ethics 18

Square One AIDS/HIV Policy 18

Codes of Good Practice 18

King Code of Corporate Practice and Conduct 18

Board of Directors 18

Board Committees 18

Internal and Financial Controls 19

Empowerment 19

Insider Trading 19

Security 19

Dividend 19

Annual Group Financial Statements Contents 20

Notice of Annual General Meeting 44

Form of Proxy Inserted

Branch Offices IBC

Head Office IBC

Branches IBC

1

HIGHLIGHTS

S Q U A R E O N E S O L U T I O N S G R O U P L I M I T E D A N N U A L R E P O R T 2 0 0 3

w w w. s q 1 . c o . z a

Vision

The Square One Solution Group’s vision is focused on providingvalue for our clients through the application of businessknowledge, technology skills and world class capability.

SALIENT FINANCIAL HIGHLIGHTS 2003

> NET PROFIT BEFORE TAX INCREASED BY 29% TO

R2,277 MILLION

> HEADLINE EARNINGS R1,711 MILLION

> HEADLINE EARNINGS PER SHARE 7,8 CENTS

> REVENUE DOWN BY 48% TO R91,422 MILLION

> BLACK EQUITY OWNERSHIP INCREASED TO 56,4%

Mission

To provide world-class products, strategies and solutions to targetmarkets, applying the principles of integrity, supplier loyalty andefficient customer support and retention.

Shareholders’ DiaryFinancial year-end December

Annual General Meeting June

Reports Published

Interim, for half-year to June September

Preliminary announcement of

annual results March

Annual financial statements June

Solutions

Service

People

2

PREAMBLE

w w w. s q 1 . c o . z a

Public Company

Square One Solutions Group Limited is an

information technology company listed under the

"Information Technology (IT) – Software and

Computer Services" Sector of the JSE Securities

Exchange South Africa ("JSE").

High Level Strategy

Square One Solutions Group Limited ("Square One")

is in the business of providing niche, early adoption,

business-enabling solution offerings to our clients.

Square One is focused on creating value for our

clients through the application of business

knowledge, technological skills and world class

capability.

Our value-add results in simplifying information

technology by reducing complexity, assisting in the

transition of IT from a fixed to a variable cost and

reducing our customers’ operating expenditure.

Nature of Business

Square One is a 56,4% black owned and controlled

IT Solutions provider. With national representation

and more than 18 years’ experience focused on the

South African market, Square One is uniquely

positioned to be large enough to ensure quality

delivery, whilst retaining a small enough culture to

truly care about our customers and employees.

The group’s value-based offerings are centered

around:

• Authentication Solutions

• Integrated Mobile Solutions

• Enterprise Storage Solutions

• Professional Services

• Applications Services

• Infrastructure Solutions

• Coding & Marking Solutions

• Channel Services Solutions

• Enterprise Power Solutions

These offerings are supported and backed by full

repair and maintenance service facilities available to

our clients in major city centres.

Branches:

Sandton

Gauteng Tel: (011) 321-5900

Fax: (011) 444-2462

Pretoria

Gauteng Tel: (012) 342-9046

Fax: (012) 342-9028

Durban

Kwa Zulu Natal Tel: (031) 268-3900

Fax: (031) 263-0882

Port Elizabeth

Eastern Cape Tel: (041) 391-9200

Fax: (041) 364-0594

Cape Town

Western Cape Tel: (021) 464-4000

Fax: (021) 448-3226

Bloemfontein

Free State Tel: (051) 448-5451

Fax: (051) 448-5456

Forward-looking Statements

Certain statements included in this report constitute

forward-looking statements, be they express or

implied. These statements are based upon tangible,

known facts, alongside existing performance

measures and the usual risk and uncertainties

involved in trend predictions. The unknown factors

may cause the actual results, performances,

objectives or achievements of the Square One

Solutions Group to differ materially from its projected

results and performances, as well as those of

subsidiary and associated companies.

GROUP MARKET

CAPITALISATION

R22 MILLION

3

DIRECTORATE AND ADMINISTRATION


w w w. s q 1 . c o . z a

The directors in office at the date of this report are

as follows:

Non-executive Chairman

Garth Alan Coetser (45) BComm, BAcc, CA (SA)

Non-executive Deputy Chairman

Raisaka Ronald Masebelanga (40) BJuris, LLB, LLM

Executive Vice Chairman

Reginald Tafara Muzariri (35) BCompt, Hons

BCompt (CTA), CA (SA)

Chief Executive Officer

William Trevor James (45)

Executive Directors

Craig Luton Alexander (35)

Bruce Antonio Croza (42) BComm, N.D. EDP

Anton Meyer (45) BComm, FA (SA)

Non-executive Directors

Professor Mandlenkosi Stanley Makhanya (42)

BA Hons, MA (Sociology), DPhil, DTE

Moira Granny Seape (47) BA (Economics)

Basetsana Thokoane (42) BA Hons, MA BTech

Changes to Board of Directors

Mr. Garth Coetser was appointed Non-executive

Chairman on 25 February 2004.

Mr. Raisaka Masebelanga was appointed to the

Board on 25 February 2004 in the capacity of

Non-executive Deputy Chairman.

Mr. Reginald Muzariri, previously a Non-executive

Director, assumed the position of Executive Vice

Chairman on 25 February 2004.

Mr. Bruce Croza, Mr. Craig Alexander and Mr. Anton

Meyer were appointed Executive Directors on

25 February 2004.

Ms Basetsana Thokoane was appointed as Non-

executive Director on 25 February 2004.

Ms Granny Seape and Professor Mandle Makhanya

were appointed Non-executive Directors on

15 March 2004.

The following persons have resigned from the

Board of Directors

Mr. Terence Ian Morrison resigned from the Board as

at 29 May 2003.

Mr. Brian George van Rooyen resigned from the

Board as at 23 February 2004.

The board of directors wish to thank Mr. Morrison

and Mr. van Rooyen for their valuable contribution in

the past and wish them well in their future

endeavours.

Company Secretary

Anthony Mervyn Craddock CA (SA)

Square One Business Address

Physical Postal

1st floor, East Block PO Box 1163

Eastgate Park Gallo Manor, 2052

8 Commerce Crescent West South Africa

Eastgate Ext. 13, Sandton

Telephone: +27 +11 321-5900

Telefax: +27 +11 444-2462

Web Address

www.sq1.co.za

Transfer Secretaries

Ultra Registrars (Pty) Limited

PO Box 4844, Johannesburg 2000

Corporate Advisor and Sponsor to Square One

Solutions Group Limited

Bridge Capital Services (Pty) Limited

PO Box 651010, Benmore, 2010

Auditors

Russell Bedford Southern Africa (JHB) Inc.

15 Catherine Avenue, Northcliff, 2195

PO Box 1757, Northcliff, 2115

4

BOARD OF DIRECTORS

w w w. s q 1 . c o . z a

REGINALD MUZARIRI(Executive Vice Chairman)

BRUCE CROZA(Executive Director)

RAISAKA MASEBELANGA(Non-executive DeputyChairman)

GARTH COETSER(Non-executive Chairman)

TREVOR JAMES(Chief Executive Officer)

CRAIG ALEXANDER(Executive Director)

GRANNY SEAPE(Non-executive Director)

ANTON MEYER(Executive Director)

PROF MANDLENKOSIMAKHANYA(Non-executive Director)

BASETSANATHOKOANE(Non-executive Director)

GROUP STRUCTURE

New HeightsCommunications

(Pty) Limited100%

ThursdayMorning (Pty)

Limited100%

ActivatedLearning Group

(Pty) Limited100%

Square OneDocumentSolutions

(Pty) Limited100%

Square OnePower Solutions

(Pty) Limited51%

eServicesDocument

Sharing Solutions(Pty) Limited

100%

WorkstationSolutions

(Pty) Limited49%

IRT Projects(Pty) Limited

16%

Square OneSolutions

Group Limited

5

CHAIRMAN’S STATEMENT


w w w. s q 1 . c o . z a

TO OUR SHAREHOLDERS

As we enter 2004, the first five year phase of our

transformation to a solutions-based organisation

nears its term and we begin another year of our

journey, optimistic in the outlook for the company’s

performance.

Delivering competitive advantage to our

customers

Our fiscal year FY’ 2003 by every measure of

performance was a tough one. However, in the fifth

year of the company’s five-year plan, the Square

One team delivered solid growth and performance,

with the management teams having made

significant strides in building Square One’s position

in the Information, Communication and Technology

arena. We are now entering a period of

consolidation and will focus on our key core

offerings and services, underpinning this with the

adoption of the key financial principles of business.

Square One is ultimately focused on growing

revenues, attracting new customers and driving

operating performance improvements.

Maximising efficiencies when the solutions are

at work

Improved operating margins and a good trading

performance helped the group migrate the

significant impact of the strong Rand, not only in the

Coding and Marking lines of business but also in the

Power and Channels lines of business.

Management is confident that at the current

exchange rates, the impacts of the deflationary

pressures experienced by many of the Group’s

operations are largely behind them. Based on the

current economic conditions, we are budgeting to

achieve real growth in headline earnings per share

for the full year to December 2004.

In addition, we have accomplished certain strategic

milestones in the development of our solutions-

based business. Square One has strengthened its

sales organisation with specialists who focus on

providing business-enabling solutions to our

customers from Square One’s expanded range of

GARTH COETSER(Non-executive Chairman)

WE’VE BECOME A

SOLUTIONS-BASED

BUSINESS

ADOPTION OF

KEY FINANCIAL

PRINCIPLES

ANNOUNCEMENT

OF BLACK

PARTNERSHIP

6

CHAIRMAN’S STATEMENT CONTINUED

w w w. s q 1 . c o . z a

solutions and services – all of this accomplished in

the face of widespread economic difficulties. Our

operating management is to be commended on an

admirable performance in difficult trading

conditions.

During the year, Square One broadened its range of

solutions and services, and enhanced the logistics

and customer fulfilment areas of the business for our

clients. Our focus has been on developing customer

relationships which has resulted in strategic

business partnerships with our clients.

Black Partnership

As a group, we are continually striving to improve

our empowerment credentials. Square One

management is committed to transformation and

the Board is appointing a Transformation Committee

to oversee the process, which will encompass all

elements of the recently promulgated broad-based

Black Empowerment Act. I am also pleased to

welcome the management and staff of Utho

Technologies to the Square One team. Square One

announced on 24 February 2004 the acquisition of

Utho Technologies (Pty) Limited, with certain

conditions precedent.

Sustainability

Square One continues to make progress with

employment equity, skills development, safety,

health and environmental policies and practices.

Our achievements reflect the strength of our

relationships with our suppliers and customers, a

sound business model, and the dedication of the

Square One team. Square One employees are the

clear drivers behind delivering this progress against

each of our strategic initiatives.

Indeed, we are pleased to report that we have

achieved four of our five main objectives we set out

to achieve in 1998, these five objectives being:

• To list the company on the JSE, which we

successfully achieved on 13 April 2000

• Staff to be actively involved in holding shares of

Square One; the majority of staff now hold

shares in the company

• Through controlled growth and actions, balance

the group by steering the company from a

distribution company towards a solutions-based

business, achieved through the establishment of

the Business Solutions line of business

• Successfully find a black partnership to embrace

the new South Africa, through the acquisition of

Utho Technologies

• Actively seek an institutional investor; this

remains a key objective and we believe that we

are nearing our goal of being able to provide a

compelling case to attract new investors

Acknowledgments

I would like to welcome our new members to the

Board and look forward to their active participation

and strategic contribution towards building a

profitable and sustainable business in the future.

My thanks to the directors and the shareholders

of Square One, as well as our clients and

suppliers, and in particular our employees for

their ongoing dedication and commitment. It is

greatly appreciated.

Sincerely

G A Coetser

Chairman of the Board

7

CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS


w w w. s q 1 . c o . z a

Group Results

Our overall position in the “Information

Communication and Technology (“ICT”)” Sector

remains strong, with clients showing their approval

of our solution offerings and services by entrusting

us with more business in the niche, early adoption,

business-enabling solution offerings. Good results

were achieved in a number of our business units

whilst others experienced a tough year. Square One

has managed to expand its business while

substantially reducing its overheads, thereby

increasing margins and tightening its controls. This

ongoing process has been positively embraced by

staff and management and a number of our

strategic goals have been met.

The group recorded a net profit before tax of

R2,277 million, an increase of 29% (2002:

R1,761 million). The directors view this result as

a resilient performance during a challenging year

of business. Revenue declined by 48% to

R91,422 million (2002: R174,196 million).

This was largely attributed to the following

two factors:

• The strengthening of the Rand adversely

affected revenue due to lowered selling prices,

particularly in the Channels business

• The group benefited from a large once-off

biometric authentication transaction in 2002,

which was not repeated this year, further

contributing to the decline in revenue

The above results are in line with our strategic intent

which retains a strong emphasis on the Power,

Coding and Marking and Business Solutions lines of

business, as well as a growing contribution from the

Channels businesses.

Our aim to increase the order book within the core

business units has been maintained and we now

have a healthy order book with our long-term

customers. Profitability has also been maintained,

aided by a firm control over expenses and cash flow

management.

TREVOR JAMES(Chief Executive Officer)

CLIENTS ENTRUSTING

US WITH MORE

BUSINESS IN THE

NICHE, EARLY

ADOPTION, BUSINESS-

ENABLING SOLUTIONS

RESULTS ARE IN LINE

WITH OUR STRATEGIC

INTENT

OUR TRACK RECORD

SPEAKS FOR ITSELF:

SQUARE ONE DELIVERS

8

CHIEF EXECUTIVE OFFICER’S REVIEW OF OPERATIONS CONTINUED

w w w. s q 1 . c o . z a

The composition of a new board represents an

important milestone as a key component of our first

phase of our long term strategy. With the

appointment of a new Board of Directors, the

Board is confident that their composition will allow

the group to generate returns on investment that

are expected by shareholders.

Square One specialises in the provision of niche,

vertical, business-enabling technology solutions.

The primary solution offerings encompass

Authentication, Social Services, Coding & Marking

Solutions, Application & Systems Integration

Services, as well as Telecommunications & Service

Provider Solutions.

These business-enabling solutions are supported by

the group’s ability to provide horizontal infrastructure

solutions spanning Network Solutions, Processing &

Storage Solutions, Infrastructure Integration, Power

Solutions, Security & Biometric Authentication and

Verification Solutions.

A focus on vertical market segments and the

underlying technology positions Square One

uniquely in the market. A particular combination of

business knowledge, IT skills and technological

capability, allows for the distinctive advantage of

being able to deliver customised, turnkey, business-

enabling solutions.

No matter how awe-inspiring the available

technologies may be, they cannot deliver a

meaningful benefit to a business unless their

individual functionality is optimised and integrated

into an enterprise-wide system. The ability to do this

is a skill set in short supply, in a world where the

demand for robust and electronic commerce

solutions is skyrocketing.

Square One has a national work force whose

collective skills are unrivalled in the technology

services industry. Devising a technology strategy

that meets business objectives is one thing.

Implementing a solution on time, consistently and

on budget is an entirely different matter. Our track

record speaks for itself: Square One delivers.

Today’s market requirements invariably comprise a

combination of best-of-breed technologies from a

multitude of vendors. As a result, we have certified

expertise in products from industry leaders across

all major platforms. In our efforts to remain at the

cutting edge, cross-skilling and up-skilling of our

human resources is an ongoing process.

Our approach focuses primarily on the Corporate,

Small Medium Enterprise and Government markets.

We aim to create maximum value through solutions

focused on enhancing flexibility and mobility in the

workforce. By channelling our energies around

providing niche solution offerings, we have

developed a specific expertise in emerging

technologies, and are in the privileged position of

being able to provide full turnkey solutions through a

well-developed eco-system of partners.

It is our intention, as part of our Solutions & Service

Offering, to assist our customers by guiding them in

better maximising their current investment in

technology, or to assist them in better leveraging

any future investments they may make in an attempt

to better enable their businesses. This will allow

them to concentrate on their core business while

maximising the value of rapid, on-demand, reliable

and constant access to information.

Whilst not aiming to be the biggest in our field,

we do aim to be the best, by being a leading

provider of highly integrated solutions that enable

our customers to maintain and develop

respective and varied competitive advantages for

their businesses.

Professional skills alone are not what sets Square

One apart. In today’s e-enabled economy, every

successful company, ours included, has to be a

customer-centric organisation. This demands an

ability to anticipate the customer’s needs and

respond to them in a manner that exceeds their

expectations. Our staff embody intellect,

knowledge and energy. Passion and a common

sense of purpose is the result. Teamwork enables

us to take performance and service to new levels

of excellence.

9



w w w. s q 1 . c o . z a

Operational Review

Square One Power Solutions (Pty) Limited

Enterprise Power Solutions:

• Uninterruptible power

*Architecture and Design

*Implementation

*Service and support

• Environmental analysis, surveys and planning

• Managed power

*Remote management and response

Square One Power has performed well,

contributing a dependable margin to group results,

and is in the proud position to offer full turnkey

power solutions aimed at addressing key physical

availability and reliability challenges that are often

overlooked as demand grows exponentially. Square

One Power Solutions has a combined 100 years’

intellectual property and has several prestigious

blue chip accounts.

Throughout 2003, a variety of major UPS solutions

were designed, supplied and installed for leading

commercial and industrial organisations, including

PFG Building Glass, Sun International, Foschini,

Engen and DaimlerChrysler.

The service operations of Square One Power

Solutions continued to expand with their Black

Partnership, IRT Projects (Pty) Limited, providing

project management and turnkey ICT and emergency

power solutions. SARS and Telkom were among

those to award national service contracts jointly to

Square One Power Solutions and IRT Projects.

The pervasive advance of technology continues to

drive new markets that result in new opportunities

for UPS solutions. The Square One Power Solutions

business is strongly positioned for 2004 with highly

experienced personnel and management able to

implement cost-effective solutions that satisfy client

requirements while ensuring added value.

Square One Capital (Pty) Limited

Square One Rentals (Pty) Limited's name has been

changed to Square One Capital (Pty) Limited.

Square One Capital is currently working to establish

key relationships with specific local and international

financial institutions in an effort to raise the

necessary cost effective funding to provide rental,

lease and other key financial offerings.

The introduction of Square One Capital, a finance,

lease and rental division within the Square One

Group, now provides entry into a previously

unexploited and lucrative market. This specialist

financing division that was established in late 2003

to assist the various operating divisions, will result in

enhanced customer offerings and ultimately,

customer retention.

Lines of Business

Coding & Marking Solutions

• Product identification

*Laser coding

*Continuous inkjet

*Outer case coding

*Thermal transfer

*Spray marking

• Commercial printing

*Mailing solutions

*Business forms

*Postal solutions

The Coding and Marking division of Square One

retains its dominant position in the Coding and

Marking industry with new clients being gained,

stimulating growth in this sector. The Coding and

Marking division has shown consistent organic

growth and whilst product-marking legislation looms

ever nearer, businesses are beginning to adopt the

benefits of date coding in terms of effective product

manufacturing management and marketing. While

the legislation is as yet un-passed, consumerism is

driving manufacturers to implement our technology

in advance of this standard becoming law.

Our competitive advantage has further been

strengthened through Square One’s largest coding

supplier, Domino, having acquired two other

companies recently, both providing for more depth

of offering, particularly in Laser and Outer Case

Coding (OCC).

10


w w w. s q 1 . c o . z a

Coupled to a 10-year relationship with the world’s

largest manufacturer of Coding and Marking

solutions, Square One Coding Solutions prides itself

on being the leader in addressing the two key

success criteria of any Coding Solution:

• Marrying the application to the solutions

• Nation-wide 24x7 support and maintenance

With an understanding and a commitment that

“Your production line is our production line”, we are

in the proud position to offer our customers coding

solutions that span the spectrum from stand alone

through to full outsourced implementations. Coding

and Marking therefore continues to contribute a

major share of group profit.

Business Solutions

Considerable progress has been made in realising

management’s focus on refining and enhancing the

solution-based offerings to our clients, whilst placing

focus on maintaining financial fundamentals crucial

in building a sustainable competitive advantage.

– Authentication Solutions

Biometric-based authentication solutions:

*“Doorway to Desktop” biometric security

*Comprehensive risk assessment

*Interactive, IT based access control

*Single sign-on

“Doorway-to-Desktop” biometric security, interactive

IT-based access control and single sign-on in

particular, are driving the latest spin-offs to existing

technology investments. Research now indicates

that businesses will be specifically addressing the

massive security risks associated with mobility,

given that its value extends and exposes a

company’s intellectual data outside of the office.

This risk will be addressed in conjunction with a

greater need for in-house security, via an holistic

approach that will address both the technologies

and corporate governance issues, through

biometrically enabled:

*Time and attendance

*Internet and network access

*Information encryption and dissemination

*Point-of-sale protection

*Pension and social grant payments

*Voter registration

*I.D card, passport and driver licence solutions

*Retail customer validation

The Biometric and Authentication division continues

to prosper with several new projects being secured.

– Integrated Mobile Solutions

Business efficiency is greatly dependent on the

accuracy and availability of information relating to all

aspects of an enterprise, from stock management

to logistics control and customer management.

Many of these areas have historically been

dependent on data capture processes with inherent

“finger problems” and misinterpretation of badly

written information. The ability to accurately manage

this information, real-time, regardless of location is

now possible.

• Mobile, Thin-client, multi-function solutions for:

• Point of sale

• Labelling

• Signage

• In-store promotions

• Asset tracking

• Goods receiving

• Stock taking & management

• Price management

• Queue busting

• Remote field usage

• Real time delivery verification

• Point of sale

– Application Services

Square One Application Services is committed to

the belief that business needs are the primary

drivers of any technology solution. Although solution

decisions must take into consideration technical

constraints and other needs, at the end of the day,

the technology solution must serve the needs of the

business. As a premier Applications Services &

Solutions provider, we must not only bring our

robust technical skills and experience to the table,

but must also guide the use of those skills from a

base of understanding about the business needs of

the clients we serve.

11



w w w. s q 1 . c o . z a

The Application Services line of business provides

comprehensive, multi-platform business solutions

for a multitude of verticals and enterprise

organisations. Through the strategic deployment of

Internet and other advanced technologies, we have

helped some of the world's leading organisations

transform their businesses in order to gain a

competitive advantage.

We do more than just create world-class

applications. We transfer knowledge and share best

practices to provide our clients with new insights,

tangible results and a rewarding experience. The

results of our unique approach are solutions that

exceed expectations and clients who share the

benefits of the process itself. We provide:

• Business and technology consultancy

• Program management

• Project management

• Mobile solutions

– Enterprise Storage Solutions

The exponential growth of data, and how and where

to store it most appropriately, has undoubtedly been

one of businesses’ main challenges. Added to this is

the increasingly more demanding legislation

governing the maintenance and availability of

information.

Storage consolidation makes good business sense.

Square One can assist companies dramatically

reduce the high maintenance costs of proliferated

storage, more fully utilise storage assets, and

improve the quality of storage services that IT offers

to the enterprise, independent of server type,

operating system type, or application.

The significant growth in demand for enterprise

storage offerings that allow the maximisation and

leveraging of current skills, whilst leveraging the full

ambit of storage virtualisation services “on the fly”, is

where we are ideally positioned to assist.

We deliver:

• IP based storage virtualisation solutions

• RAID-based storage

• Network attached storage (NAS)

• Storage area networking (SAN)

• Backup solutions

– Professional Services

• Support and maintenance services

• Multi-vendor consolidation and management

• Technology design & installation services

• Systems integration services

• Specific business/technology consultancy

• Enterprise architecture

• Solution crafting

• Bid office

• Service management

• Installation services

• Maintenance and support

– Infrastructure Solutions

Through our primary focus on the provision of

architectural, design and verification services,

Square One is constantly striving for incremental

returns that greatly improve productivity, profitability

and customer service. Here, our focus is positioned

around:

• Infrastructure integration

• Networking solutions (LAN & WAN)

• Enterprise server solutions

• Wide area infrastructure optimisation solutions

Through key alliances with “best of breed”

technology partners and integrators, Square One is

well positioned to offer the market the finest in:

• Platform migration

º Windows NT/Linux

• Server consolidation

• Data centre operations

• Desktop deployment

º “Zero touch” capabilities

• Enterprise directory

º Microsoft active directory

• Messaging and collaboration

º Microsoft Exchange

• Enterprise portal

º Sharepoint integration

• Application ready MS platform

º SAP upgrade

12


w w w. s q 1 . c o . z a

Channels

Channel Services and Solutions

• Document solutions

*Xerox

*Epson

*Fujitsu

• Storage

*Software

*Uninterruptible power supplies

*Tailored services and support

We continue to maintain a focus on the distribution

of key Document Solution offerings, colour input

and output devices, supported by a 24x7 National

Support and Service operation.

Square One remains a key boutique distributor of

colour and mono printers in the South African

market place. This enables the company to take a

broader line-up of “best-of-breed” colour input and

output devices to market. The Channel Services

organisation also provides a comprehensive range

of additional technologies through a well-developed

and mature network of dealers and integrators.

There is no doubt that customers will be forced to

pursue the value for money proposition. Channel

Services continues to play an important role in the

group and has a well established and mature

reseller channel.

Acquisitions (Post Balance Sheet Event)

In terms of our Black Economic Empowerment

(“BEE”) initiatives, the group has concluded a black

partnership agreement, effective 1 January 2004,

that gives Utho Technologies (Pty) Limited an

effective 56,4% controlling interest. This

transaction provides additional skills to the group

and will contribute towards securing a sustainable,

long-term future for the business. This agreement

has resulted in the group’s ability to meet the

majority of the requirements of the balanced

scorecard approach that is expected to flow out of

the recently announced ICT Charter and

associated BEE targets. The acquisition remains

subject to approval by the Securities Regulation

Panel, the JSE, the Competition Commission and

Square One shareholders.

In a separate but related agreement, GAC

Investment Holdings (Pty) Limited, The James Trust

and The Jartay Trust represented by Garth Alan

Coetser and William Trevor James, executive

directors of Square One, have agreed to sell

9 361 901 Square One shares, comprising 32,3% of

Square One’s issued share capital after the issue of

the 7 million Square One shares, valued at

R6,5 million, to Square One Solutions Group

Holdings (Pty) Limited, a wholly-owned subsidiary of

Utho Technologies (Pty) Limited (“the share sale”).

The Acquisition

Utho Technologies (Pty) Limited is a subsidiary of

Utho Investment Holding (Pty) Limited, a holding

company with interests in IT and corporate advisory

services. Utho is 100% owned, directly and

indirectly, by several black shareholders. Utho

Technologies was established in 1997 and is

involved in application systems integration, software

development, internet service provision, network

design and installation and IT consulting. Square

One will acquire the business with effect from the

effective date for a purchase consideration of

R4,9 million.

The acquisition consideration, payable on fulfilment

of the conditions precedent, will be satisfied by the

issue of 7 million Square One shares at 70 cents

per share.

Rationale for the acquisition and the share sale

Over the last two years, Square One has been

expanding its offering to incorporate vertical and

horizontal IT solution offerings to its customers.

The acquisition is an important step for Square

One in this regard. The acquisition provides Square

One with skilled professionals in, inter alia, the

following areas of business: systems integration, IT

business consulting, internet service provision,

web and application development, and network

design and implementation.

13



w w w. s q 1 . c o . z a

Square One has been attempting for some time, to

find an appropriate black partner that can assist in

appropriately positioning the company to take

advantage of the significant business opportunities

that are afforded to empowered companies in, inter

alia, the national and provincial government and

municipal markets. The acquisition and the share

sale will enable Square One to pursue opportunities

more aggressively in these markets.

The acquisition provides access to highly skilled

black IT professionals which will enable Square One

to move rapidly towards meeting its employment

equity requirements, particularly within the senior

management team.

The expanded group adds additional value to

customers, and across all the operations the

business is entirely complementary to Square One.

In addition, the acquisition gives rise to a strategic

partnership which is in line with the group’s long-

term strategy.

Black Economic Empowerment

Square One operates in the IT sector in South Africa

and is committed to the principles of BEE.

The transaction is a major step towards achieving

Square One’s BEE objectives. In the coming years

Square One will focus on strengthening the other

pillars of BEE, including employment equity, training

and skills development as well as BEE procurement

and enterprise development.

Outlook

Surviving companies from the IT sector’s stock

market collapse a few years ago, have proved that

they have the strength, flexibility and skill to ride

out the storm, and 2004 is showing hints of a

medium-term recovery to the embattled ICT

sector. It is exactly four years since the bubble in

technology shares reached its fullest extent, before

bursting spectacularly.

In general, our view is that IT spending is likely to

pick up over the rest of this year, however, the

growth rates are still very pedestrian. Corporates

are still smarting over what they perceive now to

have been an over-investment in technology

around the time of Y2K and in the new internet

infrastructure that sprung up in the late 1990s. It is

generally acknowledged that CIO’s do not see a

return to the past. In the absence of any single

technology or business trend to drive investment,

the emphasis is rather on supporting better

business processes and the strategic use of IT.

This can be seen in a list of business trends

identified in Gartner surveys by Global CIO’s.

Security, business continuity, operating costs,

enterprise management and data protection are

all ranked high on the focus list, all key areas that

enjoy focus from a Square One perspective.

Square One boasts 18 years of experienced

business and is one of those nationally represented

businesses which has a solid platform from which to

enter and succeed in 2004. While IT budgets will

remain extremely tight, our Business Solutions line

of business remains confident that the group is well

positioned to assist our clients in optimising their

previous investments in Information Technology and

in better leveraging any investments they may make.

Based on prospects, our Channels, Coding and

Marking and Power business provides a long

established and mature platform from which to

provide consistent and controlled growth in the

period ahead.

We are certain that our recent black partnership

transaction with Utho Technologies will further

position Square One into an entity that has the

profile and capacity to successfully deliver

quality business solutions and service to all

segments of the South African business

community, including corporate, institutional,

state-owned enterprises and government,

thereby facilitating growth in earnings and

shareholder value on an ongoing basis.

The management of Square One will continue to

align the operations in order to support our push

into new markets. We will continue to reshape the

organisation and will aggressively rejuvenate our

products and services in order to diversify our

14


w w w. s q 1 . c o . z a

sources of revenue and attract new customers. In

line with our strategy we will continue to evaluate

and seek new opportunities to enhance our skills

base and related business offerings through organic

means as well as other initiatives.

Our strategy for 2004 remains unchanged in that we

will continue to concentrate on those industry

opportunities where we are certain that we can

provide value to our customers and shareholders.

We have successfully built a strong management

team and with the enthusiasm and commitment

from our dedicated employees, we look forward to

building a strong and sustainable business in an

exciting year ahead. The Square One Solutions

Group continues to embody passion, proactivity

and performance.

W T James

Chief Executive Officer

15

EXECUTIVE TEAM


w w w. s q 1 . c o . z a

CRAIG ALEXANDER

ZIYAAD BHAYAT

TREVOR JAMESREGINALD MUZARIRI BRUCE CROZA

ANTON MEYER

TERRY MEYER

PETA KASSEL HUGH MARR

NEILL SCHREIBER

16

CORPORATE SUSTAINABLE DEVELOPMENT

w w w. s q 1 . c o . z a

Equitable and Safe Working Environment

Square One continually strives to develop and retain

its staff through the provision of an equitable, safe

and healthy working environment.

Health

The company made inroads into an aggressive and

visible HIV/AIDS campaign that it believes has

achieved its awareness objectives, the primary

objectives being to prevent new infections. Square

One is aware of the psychological and social needs

of its workforce and the humanitarian aspects of

providing help and support to those employees and

their families who are HIV-positive. Square One

repeated its annual active eye care testing and

action programme.

Environment

Square One’s Coding and Marking division means

employees are faced with dealing with specialist

chemicals and solvents. At all times, the

international guidelines and regulations governing

the management of such substances, including the

International Standard ISO 14001, are followed, in

order to maximise both the health of employees as

well as the safety of the environment we all enjoy.

It is our primary environmental objective to

work towards, and in all cases exceed, legal

requirements.

Employment Equity

The organisation commits itself to non-

discrimination and Employment Equity. It is the

policy of the organisation that discrimination of

any form will not be tolerated, and is a disciplinary

offence. The organisation’s selection policy is

aimed at addressing employment inequalities

through a structured Employment Equity

programme. However, the organisation maintains

its commitment to quality and service excellence.

To this end, tokenism is rejected and the selection

of people qualified to do the job is insisted upon at

all times. A position will not be deliberately de-

skilled to prejudice an applicant from a previously

disadvantaged group. This will ensure that

applicants are not discriminated against in terms

of their salary packages or employment benefits. It

is official organisation policy not to have

segregated facilities, amenities and events. The

organisation encourages all its employees to

undergo appropriate training and development in

order to enable them to give of their best and also

to realise their full potential in the work situation.

The organisation believes in the policy of

promotion from within, in accordance with

selection procedures and criteria, and such

promotion will be non-discriminatory and based

on merit.

Affirmative Action

As part and parcel of a broader Human Resources

Development Policy, affirmative action is seen as a

process of maximising human resources and

empowering individuals within Square One.

Square One recognises that because of

inequalities in the apartheid education system, and

race and sex discrimination in the educational and

employment opportunities available to women and

black men, it needs to take positive steps to

eliminate discrimination and to provide equal

opportunities in its own workplace. In order to

enhance the representation of under-represented

categories of people in the various posts within the

organisation, Square One has put in place an

affirmative action policy.

Workshops will be held at which staff members’

views on the Human Resources Policy, and

affirmative action as a component of it, will be

elicited and discussed. The objectives of this

workshop will be to assess progress made and to

review and amend the policy, should it be

necessary. Open and frank discussion is

supported and encouraged.

Monitoring and Evaluation

Reports on Employment Equity are done in

accordance with legislation.

17

CORPORATE SUSTAINABLE DEVELOPMENT CONTINUED


w w w. s q 1 . c o . z a

Outsourcing, Joint Ventures and Subcontractors

Square One followed a strategic intent through

2002, to promote the use of outsourcing both

essential and non-essential functions. It is believed

that this affords an environment where

entrepreneurship is encouraged, as well as

continually circulating internally, the dynamics of

external thinking and awareness of the

marketplaces in which Square One operates. Work

is outsourced in a non-discriminatory fashion. The

group continually works on the development and

building of meaningful joint-venture operations and

partnerships with black economically empowered

(BEE) companies, and small-, medium- and micro-

entrepreneurial enterprises.

Training and Development

The organisation’s policy is to encourage the

development of our employees through education

and training in order to maximise their full potential

and productivity. Most training is offered in-house as

on-the-job training. External courses are to be

considered where they can meet specific

organisational needs, and in accordance with the

Isett Seta. Every employee is given the opportunity

to utilise the available resources and improve their

skills and knowledge. The company completes a

‘needs assessment’ of all employees on an annual

basis, and arranges training programmes around

these assessments, once prioritised and in

compliance with the Skills Levy Act.

Planning and implementation of the Skills

Development Plan in accordance with the Skills

Levy Act are completed timeously, and the

company has received its reimbursements for

completion thereof. The company has also

undertaken to initiate a learnership programme in

conjunction with the Isett Seta. This programme will

provide unemployed members of the community

opportunities to become skilled and mentored. The

emphasis will be on providing skills development

opportunities for persons from previously

disadvantaged communities.

18

CORPORATE GOVERNANCE

w w w. s q 1 . c o . z a

Square One is committed to a wide range of

corporate governance practices. The directors of

Square One believe in their responsibilities,

collectively and independently, to ensure that they

demonstrate and sustain a high level of corporate

governance – and recognise their accountability to

their shareholders. The Board of Directors meets

on a regular basis, and strives at all times to

conduct the group’s business according to the

best management principles and practice. The

directors continue to conduct themselves with

dedication and professionalism.

Code of Ethics

The company is committed to the highest standards

of behaviour in dealing with all its stakeholders. All

directors and employees are required to maintain

the highest ethical standards towards ensuring that

Square One’s business practices are conducted in a

reasonable manner, and are both in the interests of

the company and in good faith. Square One accepts

the recommendation of the King Report II that the

company should conduct its affairs with

uncompromising honesty and integrity.

Square One AIDS/HIV Policy

This policy protects the legal right of employees who

are diagnosed with an AIDS virus-related condition

to work, and provides guidelines for situations

where infection with the AIDS virus is suspected.

Our policy is to encourage sensitivity to, and

understanding for, employees affected with a

condition of the AIDS virus, and to ensure total

confidentiality at all times. It is also company policy

to educate staff members regarding the spread of

AIDS and effective measures to prevent AIDS.

We are committed to maintaining a healthy work

environment by protecting the physical and

emotional health and well-being of all employees in

the workplace. We also have a continuing

commitment to provide employment for people with

physical disabilities who are able to work. This AIDS

policy is a direct outgrowth of those commitments.

Employees who are diagnosed with an AIDS virus-

related condition may continue to work if they are

deemed medically able to work and can meet

acceptable performance standards.

Codes of Good Practice

The company adheres to the Codes of Good

Practice as specified by the Department of Labour.

This serves to ensure that:

• The company has created a non-discriminatory

working environment

• HIV testing and disclosure is done with

confidentiality

• The employee is provided with equitable

employee benefits

• The company creates a safe working

environment for all employees

• The company introduces measures to prevent

the spread of HIV

• The company supports individuals who are

infected so that they may work productively for

as long as possible

King Code of Corporate Practice & Conduct

The Board of Square One is committed to

maintaining the standards of integrity; accountability

and openness advocated in the King Report on

Corporate Governance (King I) and is working

towards the attainment of the succeeding King II

Report requirements.

Board of Directors

The Board consists of ten directors, comprising the

chairman, a chief executive officer, five executive

directors and five independent non-executive

directors. Both Mr. Terence Ian Morrison and

Mr. Brian George van Rooyen resigned from the

Board on the 29 May 2003 and 23 February 2004

respectively, and no longer participate on the

Square One Board, having resigned to pursue their

own business interests.

Board Committees

The non-executive directors of the Board are

expected to play an active role in the various

committees established by the Board. However,

19

CORPORATE GOVERNANCE CONTINUED


w w w. s q 1 . c o . z a

it should be noted that the delegation of authority to

committees does not discharge nor mitigate the

Board and its directors of their responsibilities for

their duties to the group’s stakeholders.

Audit Committee

The primary responsibilities of this committee

include the maintenance of high standards of

records and systems of internal control, the

safeguarding of the company’s assets and

shareholders’ investments, assisting the Board in

monitoring the standards of corporate

governance, and advising the Board of the “going

concern” status of the company. The external and

internal auditors have unrestricted access to the

audit committee.

Remuneration Committee

This committee meets periodically to assess,

authorise and implement appropriate levels of

remuneration for the executive directors and senior

management of the group.

Internal and Financial Controls

The group’s systems of internal and financial

control are designed to safeguard the integrity and

reliability of the financial information and to verify

and maintain accountability of revenue and

assets. These controls are implemented and

managed by skilled operational personnel and

monitored by the directors. The group’s personal

performance appraisal system contributes

towards the way in which internal controls are

measured, and regular management reviews

conducted. Financial management is measured

against industry standard internal control norms

and is constantly reviewed to ensure consistency

and objectivity.

Empowerment

Square One is an equal opportunity employer,

committed to a working environment that is free

from any racial- or gender-based discrimination. The

group continually evaluates the development of the

skills and abilities of its employees.

Insider Trading

Dealing in Square One shares by any Square One

director or employee on the basis of unpublished

or confidential information, whether directly or

indirectly, is strictly prohibited. Restrictions are

imposed on employee trading where such

information could affect the price sensitivity of

the shares.

Security

In terms of the King Commission II on corporate

governance, the Board of Directors acknowledges

its ultimate responsibility for the risks associated

with a breach of the company’s networks. Square

One’s directors understand the value of the

company’s data and intellectual capital and

continually address and evaluate the level of risk

they deem acceptable and address accordingly.

Square One remains in the fortunate position as an

IT company, of having access to the latest

benchmarks in security as well as a top-level

understanding thereof. The company has an

effective IT infrastructure in place and continues to

examine and deploy leading biometric security

technology recognised as well above industry

standard levels.

Dividend

With the available opportunities to grow organically,

pursue a potential institutional investor and to

reduce interest-bearing borrowings, the directors

have decided not to declare a dividend at this time.

20

ANNUAL GROUP FINANCIAL STATEMENTS

w w w. s q 1 . c o . z a

The reports and statements set out below comprise the annual group financial statements presented to

the members:

Page

Report of the independent auditors 21

Secretary’s certificate 21

Report of the directors 22

Balance sheets 24

Income statements 25

Statements of changes in equity 26

Cash flow statements 27

Notes to the annual group financial statements 28

The annual financial statements and group financial statements which appear on pages 22 to 43 were

approved by the board of directors on 29 March 2004 and signed on their behalf.

R T Muzariri

A Meyer

21

REPORT OF THE INDEPENDENT AUDITORS


w w w. s q 1 . c o . z a

TO THE MEMBERS OF

SQUARE ONE SOLUTIONS GROUP LIMITED

We have audited the annual financial statements and group financial statements of Square One SolutionsGroup Limited set out on pages 22 to 43 for the year ended 31 December 2003. These financial statementsare the responsibility of the company's directors. Our responsibility is to express an opinion on these financialstatements based on our audit.

Scope

We conducted our audit in accordance with statements of South African Auditing Standards. Thosestandards require that we plan and perform the audit to obtain reasonable assurance that the financialstatements are free of material misstatement. An audit includes:

– examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,

– assessing the accounting principles used and significant estimates made by management, and

– evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

Audit opinion

In our opinion, the financial statements fairly present, in all material respects, the financial position of thecompany and the group at 31 December 2003 and the results of its operations and cash flows for the yearthen ended in accordance with South African statements of Generally Accepted Accounting Practice, and inthe manner required by the Companies Act in South Africa.

Russell Bedford Southern Africa (JHB) Inc.Chartered Accountants (S.A.) NorthcliffRegistered Accountants and Auditors 29 March 2004

SECRETARY’S CERTIFICATE

I hereby certify, in terms of Section 268 of the Companies Act, 1973, as amended, that the company haslodged with the Registrar of Companies all such returns as are required of a public company in terms of theAct, and that all such returns are true, correct and up to date as at 31 December 2003.

A M CraddockCompany Secretary

31 March 2004

22

REPORT OF THE DIRECTORSFOR THE YEAR ENDED 31 DECEMBER 2003

w w w. s q 1 . c o . z a

The directors present their report for the year ended 31 December 2003. This report forms part of the auditedfinancial statements.

1. General review

The main business of the company and the group is that of importation and distribution of computerprinters, peripherals and related items, as well as consultative business solution services.

The company's and group's business and operations and the results thereof are clearly reflected in theattached financial statements.

2. Statements of responsibility

The directors are responsible for monitoring the preparation of and the integrity of the financialstatements and related information included in this annual report.

In order for the Board to discharge its responsibilities, management has developed and continues tomaintain a system of internal control. The Board has ultimate responsibility for the system of internalcontrol and reviews its operation, primarily through the Audit Committee and various other risk-monitoring committees.

The internal controls include a risk-based system of internal accounting and administrative controlsdesigned to provide reasonable but not absolute assurance that assets are safeguarded and thattransactions are executed and recorded in accordance with generally accepted business practices andthe group's policies and procedures. These controls are implemented by trained, skilled personnel withan appropriate segregation of duties, are monitored by management and include a comprehensivebudgeting and reporting system operating within strict deadlines and an appropriate control framework.

The external auditors are responsible for reporting on the financial statements.

The financial statements are prepared in accordance with the South African Statements of GenerallyAccepted Accounting Practice and incorporate disclosure in line with the accounting philosophy of thegroup. The annual financial statements are based on appropriate accounting policies consistently appliedand supported by reasonable and prudent judgments and estimates.

The directors believe that the group will be a going concern in the year ahead. For this reason theycontinue to adopt the going concern basis in preparing the group annual financial statements.

The auditors have concurred with the above statements.

3. Financial results and dividends

No dividends have been declared and none are recommended.

4. Share capital

There were no changes in the authorised or the issued share capital of the company and the groupduring the year under review.

5. Fixed assets

The company purchased fixed assets costing R775 360 (Group: R1 101 949) during the year underreview (2002: R1 035 481) (2002 Group: R2 389 169)

23

REPORT OF THE DIRECTORSFOR THE YEAR ENDED 31 DECEMBER 2003 (cont inued)


w w w. s q 1 . c o . z a

6. Acquisitions, investments and disposals

At the beginning of the year the company had a 100% share holding in eServices Document Sharing

Solutions (Proprietary) Limited, a 100% share holding in Square One Document Solutions (Proprietary)

Limited, a 51% shareholding in Square One Power Solutions (Proprietary) Limited, a 100% share holding

in Activated Learning Group (Proprietary), a 100% share holding in New Heights Communication

(Proprietary) Limited and a 100% share holding in Thursday Morning (Proprietary) Limited.

At the beginning of the year under review the company disposed of its investment in Square One

Document Solutions (Proprietary) Limited but reacquired the investment towards the end of the year.

7. Subsequent events

The group has concluded a black partnership agreement, effective 1 January 2004, that gives Utho

Technologies (Pty) Limited an effective 56,4% controlling interest.

8. Number of employees

The number of employees at year end was 136 (2002: 167).

9. Directors and secretary

The directors of the company during the accounting period and up to the date of this report were as

follows:

Executive directors:

G A Coetser Chairman

T I Morrison Resigned 29 May 2003

W T James Chief Executive Officer

S K Berryman British, resigned 31 March 2003

Non-executive directors:

B van Rooyen

R T Muzariri

Company secretary

A M Craddock

Transfer secretary

The transfer secretary of the company is Ultra Registrars (Proprietary) Limited, whose business and

postal addresses are:

11 Diagonal Street

Johannesburg

2001

PO Box 4844

Johannesburg

2000

10. Auditors

Russell Bedford Southern Africa (JHB) Inc. will continue in office in accordance with section 270(2) of the

Companies Act.

24

CONSOLIDATED BALANCE SHEETSAS AT 31 DECEMBER 2003

w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

Notes R R R R

ASSETS

Non-current assets 13 926 636 8 486 307 13 891 215 3 740 321

Fixed assets 2 993 888 1 646 168 1 326 873 1 904 466

Intangible assets 3 395 115 – 8 921 805 13 095

Investments in subsidiaries 4 615 451 300 451 – –

Loans to subsidiaries 4 11 922 182 5 789 688 – –

Investments 5 – – 16 000 16 000

Loans receivable 6 – 750 000 – 1 049 346

Deferred taxation 7 – – 3 626 537 757 414

Current assets 23 761 475 28 194 184 44 734 305 51 280 198

Inventories 8 10 686 495 15 649 955 15 244 795 19 098 586

Accounts receivable 9 12 056 724 11 877 539 28 620 169 30 957 179

Taxation 28 547 29 649 29 909 31 011

Bank balances 10 989 709 637 041 839 432 1 193 422

Total assets 37 688 111 36 680 491 58 625 520 55 020 519

EQUITY AND LIABILITIES

Capital and reserves 4 418 871 4 416 068 5 963 324 4 479 404

Issued capital 11 220 000 220 000 220 000 220 000

Share premium 8 799 724 8 799 724 8 799 724 8 799 724

(Accumulated loss)/retained

income (4 600 853) (4 603 656) (3 559 317) (4 901 444)

Outside shareholders' interest 12 – – 502 917 361 124

Non-current liabilities 17 713 423 11 572 591 21 224 355 2 718 946

Outside shareholders' loans 13 – – 365 017 365 017

Non interest bearing liabilities 14 – 1 744 634 – 2 253 929

Interest bearing liabilities 15 14 817 948 136 462 20 859 338 100 000

Loans from subsidiaries 4 2 895 475 9 691 495 – –

Current liabilities 15 555 817 20 691 832 31 437 841 47 822 169

Accounts payable 10 946 650 4 846 277 22 716 228 25 367 898

Current portion of interest bearing

liabilities 15 3 483 245 95 753 7 286 858 199 603

Provisions 16 337 292 241 168 1 296 712 261 419

Bank overdrafts 10 788 630 15 508 634 138 043 21 993 249

Total equity and liabilities 37 688 111 36 680 491 58 625 520 55 020 519

25

CONSOLIDATED INCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003


w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

Notes R R R R

Gross revenue 17 49 139 644 96 620 455 91 421 778 174 196 068

Cost of sales (31 672 692) (68 288 222) (63 328 619) (129 995 678)

Gross profit 17 466 952 28 332 233 28 093 159 44 200 390

Operating costs (15 253 818) (34 795 388) (27 296 690) (38 133 932)

Exceptional loss 18 – – – (8 221 400)

Other income 578 245 6 746 277 4 815 521 7 260 260

Operating profit 19 2 791 379 283 122 5 611 990 5 105 318

Interest received 20 110 385 738 490 127 260 807 583

Finance costs 21 (2 897 760) (3 138 123) (3 462 404) (4 152 038)

Profit/(loss) before taxation 4 004 (2 116 511) 2 276 846 1 760 863

Taxation 24 1 201 (34 701) 792 926 1 296 369

Profit/(loss) after taxation 2 803 (2 151 212) 1 483 920 464 494

Outside shareholders' interest – – (141 793) (361 075)

Earnings/(loss) attributable to

shareholders 25 2 803 (2 151 212) 1 342 127 103 419

Earnings/(loss) per share (cents) 0,01 (9,7) 6,1 0,05

Headline earnings/(loss) (cents) 0,01 (9,7) 7,8 37,8

26

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2003

w w w. s q 1 . c o . z a

Company: (Accumulated

Share Share loss)/retained

capital premium income Total

R R R R

Balance at 1 January 2002 220 000 8 799 724 (2 452 444) 6 567 280

Net loss for the year (2 151 212) (2 151 212)

Balance at 1 January 2003 220 000 8 799 724 (4 603 656) 4 416 068

Net profit for the year 2 803 2 803

Balance at 31 December 2003 220 000 8 799 724 (4 600 853) 4 418 871

Group: Non-distri- (Accumulated

Share Share butable loss)/retained

capital premium reserve income Total

R R R R R

Balance at 1 January 2002 220 000 8 799 724 62 765 (5 004 863) 4 077 626

Net profit for the year 103 419 103 419

Disposal of translation

reserve (62 765) - (62 765)

Balance at 1 January 2003 220 000 8 799 724 - (4 901 444) 4 118 280

Net profit for the year 1 342 127 1 342 127

Balance at 31 December

2003 220 000 8 799 724 - (3 559 317) 5 460 407

27

CONSOLIDATED CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003


w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

Notes R R R R

Cash flows from operating

activities

Cash receipts from customers 48 960 459 108 081 029 93 758 788 181 649 712

Cash paid to suppliers and

employees (34 211 548) (110 873 973) (82 030 648) (164 606 510)

Cash generated by/(utilised in)

operating activities 28.1 14 748 911 (2 792 944) 11 728 140 17 043 202

Interest received 110 385 738 490 127 260 807 583

Interest paid (2 897 760) (3 138 123) (3 462 404) (4 152 038)

Taxation paid 28.2 (99) (285 760) (3 660 947) (188 011)

Net cash inflow/(outflow) from

operating activities 11 961 437 (5 478 337) 4 732 049 13 510 736

Cash flows from investing

activities

Fixed assets acquired (775 360) (1 035 481) (1 101 949) (2 389 169)

Intangible assets acquired (104 516) – (9 000 247) –

Proceeds on disposals of fixed

assets 716 319 – 773 706 1 069 776

Proceeds of disposals of intangible

assets (556 038) - (544 353) –

Increase in loans receivable – (1 028 972) – –

Investment in subsidiaries (13 243 514) 6 839 451 – (11 904 771)

Other investments – – – (16 000)

Net cash (used in)/generated by

from investing activities (13 963 109) 4 774 998 (9 872 843) (13 240 164)

Cash flows from financing

activities

Loans raised 16 324 344 257 628 25 592 664 –

Loans receivable repaid 750 000 – 1 049 346 –

Loans repaid – – – (359 158)

Net cash inflow/(outflow) from

financing activities 17 074 344 257 628 26 642 010 (359 158)

(Increase/(decrease))/increase in

cash and cash equivalents 15 072 672 (445 711) 21 501 216 (88 586)

Cash and cash equivalents at

beginning of the year 28.3 (14 871 593) (14 425 882) (20 799 827) (20 711 241)

Cash and cash equivalents at end

of the year 28.3 201 079 (14 871 593) 701 389 (20 799 827)

28

NOTES TO THE ANNUAL GROUP FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003

w w w. s q 1 . c o . z a

1. Accounting basis

The annual financial statements incorporate the following principal accounting policies, set out below,which are consistent with those adopted in the previous year.

1.1 Statement of compliance

The financial statements are prepared in accordance with the South African statements of GenerallyAccepted Accounting Practice and the requirements of the South African Companies Act.

1.2 Basis of preparation

The financial statements are prepared under the historical cost convention as modified by therevaluation of certain property, plant and equipment, marketable securities and investmentproperties where appropriate.

1.3 Revenue recognition

Sales are recorded in the financial statements at the date the goods are delivered to customersor services are performed.

1.4 Basis of consolidation

The consolidated financial statements include the assets and liabilities of the subsidiaries as wellas its results for the period. Where changes of interest took place during the year the results ofthe subsidiary are included as from the effective date of becoming a subsidiary to the effectivedate of disposal. Intra-group sales and profits are eliminated fully on consolidation.

1.5 Goodwill

The difference between the fair value of the consideration paid and the fair value of net tangibleassets of subsidiaries at the date of acquisition is charged or credited to goodwill arising onconsolidation. Goodwill is amortised over a period of 10 years. In the event of a permanentimpairment in the value of a subsidiary, the relevant unamortised balance is written off.

1.6 Investments

Investments, other than in associates, are stated at cost and are written down only where there isa permanent impairment in value. Dividends are brought to account as at the last day ofregistration in respect of listed shares, and when declared in respect of unlisted shares.

1.7 Fixed assets

Fixed assets are included at cost. Cost includes all costs directly attributable to bringing the assetsto working condition for their intended use.

Depreciation is calculated by a charge to income computed on a straight line basis so as to writeoff the cost or amount of the valuation of the assets over their expected useful lives.

The depreciation rates applicable to each category of fixed assets is as follows:Motor vehicles 20%Furniture and fittings 20%Workshop equipment 20%Office equipment 20%Computer equipment 33,33%

1.8 Intangible assets

Intangible assets are included at cost. Cost includes all costs directly attributable to bringing theassets to working condition for their intended use.

Amortisation is calculated by a charge to income computed on a straight line basis so as to writeoff the cost or amount of the valuation of the assets over their expected useful lives.

29

NOTES TO THE ANNUAL GROUP FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2003 (cont inued)


w w w. s q 1 . c o . z a

1. Accounting basis (continued)

1.8 Intangible assets (continued)

The amortisation rates applicable to each category of intangible assets is as follows:Goodwill, patents and trademarks 10%Computer software 50%

1.9 Leased assets

Finance leasesWhere assets are acquired under finance lease agreements that transfer to the companysubstantially all the risks and rewards of ownership, their cash cost equivalent is capitalised. Thecapital element of the leasing commitment is disclosed under long-term liabilities. Lease rentalsare apportioned between capital and interest elements, using the effective interest rate method.

Operating leasesLeases where the lessor retains the risks and rewards of ownership of the underlying assets areclassified as operating leases. Payments made under operating leases are charged againstincome on a straight line basis over the period of the lease.

1.10 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on aweighted average basis and includes transport and handling costs. Where necessary, provision ismade for obsolete, slow moving and defective inventory.

1.11 Taxation

Current tax comprises tax payable calculated on the basis of the expected taxable income for theyear, using the tax rates enacted at the balance sheet date, and any adjustment of tax payable forprevious years.

Deferred tax is provided using the balance sheet liability method, based on temporary differences.Temporary differences are differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and their tax base. The amount of deferred tax provided is based onthe expected manner of realisation or settlement of the carrying amount of assets and liabilitiesusing the tax rates enacted or substantively enacted at the balance sheet date. Deferred tax ischarged to the income statement. The effect on deferred tax of any changes in tax rates isrecognised in the income statement.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits willbe available against which the associated unused tax losses and deductible temporary differencescan be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that therelated tax benefit will be realised.

1.12 Impairment

The carrying amounts of the group's assets are reviewed at each balance sheet date to determinewhether there is any indication of impairment. If there is any indication that an asset may beimpaired, its recoverable amount is estimated. The recoverable amount is the higher of its netselling price and its value in use.

In assessing value in use, the expected future cash flows from the asset are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the timevalue of money and the risk specific to the asset. An impairment loss is recognised whenever thecarrying amount of an asset exceeds its recoverable amount.

For an asset that does not generate cash inflows that are largely independent of those from otherassets the recoverable amount is determined for the cash-generating unit to which the assetbelongs. An impairment loss is recognised in the income statement whenever the carrying amountof the cash-generating unit exceeds its recoverable amount.

30


w w w. s q 1 . c o . z a


1.12 Impairment (continued)

A previously recognised impairment loss is reversed if the recoverable amount increases as aresult of a change in the estimates used to determine the recoverable amount, but not to anamount higher than the carrying amount that would have been determined (net of depreciation)had no impairment loss been recognised in prior years.

1.13 Employee benefits

Short-term employee benefitsThe cost of all short-term employee benefits is recognised during the period in which the employeerenders the related service.

The provision for employee entitlements to wages, salaries and annual leave represents theamount which the company has a present obligation to pay as a result of employees' servicesprovided to the balance sheet date. The provisions have been calculated at undiscountedamounts based on current wage and salary rates.

Retirement benefitsThe company contributes to a defined contribution plan. Contributions to the defined contributionfund are charged against income as incurred.

1.14 Provisions

Provisions are recognised when the group has a present legal or constructive obligation as aresult of past events, for which it is probable that an outflow of economic benefits will occur, andwhere a reliable estimate can be made of the amount of the obligation. Where the effect ofdiscounting is material, provisions are discounted. The discount rate used is a pre-tax rate thatreflects current market assessments of the time value of money and, where appropriate, the risksspecific to the liability.

1.15 Derivative financial instruments

The derivative instruments used by the group, which are used solely for hedging purposes (i.e. tooffset foreign exchange risks) are forward rate agreements and forward foreign exchangecontracts. Such derivative instruments are used to alter the risk profile of an existing underlyingexposure of the group in line with the group's risk management policies.

Forward foreign exchange contracts are valued at the closing rates of exchange. Resulting gainsand losses are dealt with in the income statement.

Where the instrument ceases to meet the criteria of being a hedge transaction or the underlyingexposure which it is hedging is sold, matures or is extinguished, then the instrument is valued atthe appropriate market rate, after having taken account of selling costs. Any resultant gains andlosses are reflected in operating income in the consolidated profit and loss account. A similartreatment is applied where the hedge is of a future transaction and that transaction is no longerlikely to occur.

1.16 Financial instruments

Financial assets are recognised when the group has the rights or other access to economicbenefits. Such assets consist of cash, equity instruments, a contractual right to receive cash oranother financial asset, or a contractual right to exchange financial instruments with another entityon potentially favourable terms. Financial liabilities are recognised when there is an obligation totransfer benefits and that obligation is a contractual liability to deliver cash or another financialasset or to exchange financial instruments with another entity on potentially unfavourable terms.When these criteria no longer apply, a financial asset or liability is no longer recognised.

If a legally enforceable right exists to set off recognised amounts of financial assets and liabilities,which are in determinable monetary amounts, and the group intends to settle on a net basis, therelevant financial assets and liabilities are offset.

31



w w w. s q 1 . c o . z a


1.16 Financial instruments (continued)

Interest costs are charged against income in the year in which they are incurred. Premiums ordiscounts arising from the difference between the net proceeds of financial instruments purchasedor issued and the amounts receivable or repayable at maturity are taken to net interest payableover the life of the instrument.

Where the fair value of an asset's carrying amount falls below the asset's carrying value, anydifference is, in the case of fixed assets, provided for if it is regarded that impairment exists. In thecase of current assets, provision is only made to the extent that it is considered as resulting in alower net realisable value.

MeasurementFinancial instruments are initially measured at cost, which includes transaction costs. Subsequentto initial recognition these instruments are measured as set out below.

Trade and other receivablesTrade and other receivables originated by the company are stated at cost less provision fordoubtful debts.

Cash and cash equivalentsCash and cash equivalents are measured at fair value.

Financial liabilitiesNon-derivative financial liabilities are recognised at cost, comprising original debt lessprincipal payments.

Credit riskManagement has a credit policy in place and the exposure to credit risk is monitored on anongoing basis. Credit evaluations are performed on all customers requiring credit over a certainamount. Reputable financial institutions are used for investing and cash handling purposes.

At balance sheet date there were no significant concentrations of credit risk. The maximum exposureto credit risk is represented by the carrying amount of each financial asset in the balance sheet.

Liquidity risk managementLiquidity risk is managed using cash flow forecasts and by the maintenance of adequateborrowing facilities with the holding company and the banks.

1.17 Foreign currency transactions

Transactions in foreign currencies are translated at the rates of exchange ruling at the transactiondate. Monetary assets and liabilities in foreign currencies are translated at the rates of exchangeruling at the balance sheet date. Any foreign exchange differences are dealt with in the incomestatement in the year in which the difference occurs.

1.18 Segment reporting

The group imports and distributes a wide range of printer and printer related products, includinguninterruptible power supply units, coding and marking machines and educational software.

As well as supplying the above products the group is involved with a number of follow up servicesfrom which they derive income.

Segment results include revenue and expenses directly attributable to a segment and the relevantportion of group expenses that can be allocated on a reasonable basis to a segment, whetherfrom external transactions or from transactions with other group segments. Intersegment transferpricing is based on cost plus an appropriate margin.

Assets, liabilities and capital expenditure per segment have not been presented as these areaccounted for within the specific legal entities, that represent multiple business units which sharemany operating assets and liabilities.

32


w w w. s q 1 . c o . z a

2. Fixed assets

Company:

2003 2002

Accumu- Accumu-

lated Carrying lated Carrying

Cost depreciation value Cost depreciation value

Owned assets

Motor vehicles 3 468 3 466 2 3 468 3 466 2

Furniture and fittings 768 042 539 983 228 059 750 136 394 231 355 905

Workshop equipment 147 780 101 787 45 993 106 180 66 934 39 246

Computer equipment 2 074 301 1 590 933 483 368 2 063 081 1 188 640 874 441

2 993 591 2 236 169 757 422 2 922 865 1 653 271 1 269 594

Capitalised leased assets

Motor vehicles 783 757 549 307 234 450 635 866 265 529 370 337

Computer equipment 36 638 34 622 2 016 184 530 178 293 6 237

820 395 583 929 236 466 820 396 443 822 376 574

3 813 986 2 820 098 993 888 3 743 261 2 097 093 1 646 168

The carrying amounts of fixed assets can be reconciled as follows:

Carrying Carrying

value at value

beginning at end

of year Additions Transfer Disposals Depreciation of year

Owned assets

Motor vehicles 2 – – – – 2

Furniture and fittings 355 905 18 609 (702) – (145 753) 228 059

Workshop equipment 39 246 41 600 – – (34 853) 45 993

Computer equipment 874 441 567 259 (556 038) (11 687) (390 607) 483 368

1 269 594 627 468 (556 740) (11 687) (571 213) 757 422


Motor vehicles 370 337 147 892 (145 684) – (138 095) 234 450

Computer equipment 6 237 – 145 684 (147 892) (2 013) 2 016

376 574 147 892 – (147 892) (140 108) 236 466

1 646 168 775 360 (556 740) (159 579) (711 321) 993 888

33



w w w. s q 1 . c o . z a

2. Fixed assets (continued)

Group:

2003 2002

Accumu- Accumu-

lated Carrying lated Carrying

Cost depreciation value Cost depreciation value

Owned assets

Motor vehicles 3 468 3 466 2 3 468 3 466 2

Furniture and fittings 878 696 627 802 250 894 891 174 503 772 387 402

Workshop equipment 276 358 157 287 119 071 192 983 103 504 89 479

Computer equipment 2 729 249 2 183 490 545 759 3 274 110 2 312 217 961 893

3 887 771 2 972 045 915 726 4 361 735 2 922 959 1 438 776


Motor vehicles 1 089 507 680 376 409 131 761 966 302 513 459 453

Computer equipment 36 638 34 622 2 016 184 530 178 293 6 237

1 126 145 714 998 411 147 946 496 480 806 465 690

5 013 916 3 687 043 1 326 873 5 308 231 3 403 765 1 904 466

The carrying amounts of fixed assets can be reconciled as follows:

Carrying Carrying

value at value

beginning at end

of year Additions Transfer Disposals Depreciation of year

Owned assets

Motor vehicles 2 – – – – 2

Furniture and fittings 387 402 24 287 36 063 (36 765) (160 093) 250 894

Workshop equipment 89 479 83 374 – – (53 782) 119 071

Computer equipment 961 893 585 988 (544 353) – (457 769) 545 759

1 438 776 693 649 (508 290) (36 765) (671 644) 915 726


Motor vehicles 459 453 408 300 (145 683) (80 759) (232 180) 409 131

Computer equipment 6 237 – 145 683 (147 892) (2 012) 2 016

465 690 408 300 – (228 651) (234 192) 411 147

1 904 466 1 101 949 (508 290) (265 416) (905 836) 1 326 873

Assets with a book value of R411 147 (2002: R465 690) are subject to capitalised lease agreements.

Refer note 15.

34


w w w. s q 1 . c o . z a

3. Intangible assets

Company:

2003 2002

Accumu- Accumu-

lated Carrying ulated Carrying

Cost amortisation value Cost amortisation value

Computer software 660 554 265 440 395 114 – – –

660 554 – 395 114 – – –

The carrying amounts of intangible assets can be reconciled as follows:

Carrying Carrying

value at value at

beginning Transfers/ Amorti- beginning

of year Additions other sation of year

Computer software – 104 516 556 038 (265 440) 395 114

– 104 516 556 038 (265 440) 395 114

Group:

2003 2002

Accumu- Accumu-

lated Carrying ulated Carrying

Cost amortisation value Cost amortisation value

Goodwill 8 856 979 369 041 8 487 938 – – –

Computer software 749 307 315 440 433 867 50 000 36 905 13 095

9 606 286 684 481 8 921 805 50 000 36 905 13 095

The carrying amounts of intangible assets can be reconciled as follows:

Carrying Carrying

value at value at

beginning Transfers/ Amorti- beginning

of year Additions other sation of year

Goodwill – 8 856 979 – (369 041) 8 487 938

Computer software 13 095 143 268 544 353 (266 849) 433 867

13 095 9 000 247 544 353 (635 890) 8 921 805

35



w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

4. Investments in subsidiaries

Shares at cost less provisions and

amounts written off 615 451 300 451 – –

Square One Document Solutions

(Proprietary) Limited – 100 Ordinary

shares at cost (100% holding) 315 100 100 – –

eServices Document Sharing

Solutions (Proprietary) Limited –

100 Ordinary shares at cost

(100% holding) 100 100 – –

Square One Power Solutions


shares at cost (51% holding) 51 51 – –

Activated Learning Group

(Proprietary) Limited – 1 000 ordinary


Thursday Morning (Proprietary) Limited 300 000 300 000 – –

New Heights Communications



Amounts owing by/(to) subsidiaries: 11 922 182 5 789 688 – –

eServices Document Sharing

Solutions (Proprietary) Limited 570 035 213 163 – –

Square One Power Solutions

(Proprietary) Limited 865 463 245 770 – –

Square One Document Solutions

(Proprietary) Limited 4 754 635 4 509 267 – –


(Proprietary) Limited – 821 488 – –

Thursday Morning (Proprietary)

Limited 5 732 049 – – –

Less:

Loans by subsidiaries 2 895 475 9 691 495 – –

Thursday Morning (Proprietary)

Limited – 7 849 940 – –

Activated Learning Group

(Proprietary) Limited 2 639 732 1 841 555 – –


(Proprietary) Limited 255 743 – – –

9 642 158 (3 601 356) – –

The loans to all subsidiary companies have been subordinated in favour of external creditors of these

companies until such time as the assets of the subsidiary companies, fairly valued, exceeds their liabilities.

36


w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

5. Investments

The group held investments in the following companies:

IRT Projects (Proprietary) Limited – – 16 000 16 000

Directors' valuation of unlisted shares – – 16 000 16 000

6. Loans receivable

Workstation Solutions (Proprietary) Limited – - – 299 346Square One Solutions Incorporated (United States of America) – 750 000 – 750 000

– 750 000 – 1 049 346

These loans are unsecured, interest free and have no fixed terms of repayment.

7. Deferred taxation

Balance at beginning of year – – 757 414 –Movements during year attributable to:Timing differences – – 2 869 123 757 414

Balance at end of year – – 3 626 537 757 414

The balance comprises:Assessed losses – – 3 626 537 757 414

– – 3 626 537 757 414

8. Inventories

The amounts attributable to the different categories are as follows:

Finished goods 10 686 495 15 649 955 15 244 795 19 098 586

9. Accounts receivable

Accounts receivable consists of the following:Trade debtors 8 742 744 9 482 192 22 124 799 26 363 098Sundry deposits 68 514 52 667 76 845 60 998Prepaid expenses 197 446 194 688 207 694 201 753Sundry debtors 3 048 020 2 147 992 6 210 831 4 331 330

12 056 724 11 877 539 28 620 169 30 957 179

10. Bank balances

Bank overdrafts of the group are secured by means of unlimited cross company guarantees between thecompany and Activated Learning Group (Proprietary) Limited, eServices Document Sharing Solutions(Proprietary) Limited and Square One Power Solutions (Proprietary) Limited

There is also a cession of debtors and a general notarial bond over inventory of Square One SolutionsGroup Limited.

37



w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

11. Issued capital

Authorised

200 000 000 ordinary shares of

1c each 2 000 000 2 000 000 2 000 000 2 000 000

Issued

22 000 000 ordinary shares of

1c each 220 000 220 000 220 000 220 000

The directors are authorised, until the

forthcoming annual general meeting,

to dispose of the unissued shares for

any purpose and upon such terms

and conditions as they deem fit.

12. Outside shareholders' interest

Balance at beginning of year – – 361 124 1 567 281

Share of current year profits – – 141 793 361 075

Loss on disposal of subsidiary – – – (1 567 232)

Balance at end of year – – 502 917 361 124

13. Outside shareholders' loans

N Schreiber – – 20 322 20 322

L Mampe – – 64 619 64 619

N Burnard – – 92 921 92 921

E Uken – – 94 235 94 235

A van der Westhuizen – – 92 920 92 920

– – 365 017 365 017

14. Non interest bearing liabilities

GAC Investment Holdings

(Proprietary) Limited – 1 744 634 – 2 071 206

Square One Investments

(Proprietary) Limited – – – 182 723

– 1 744 634 – 2 253 929

These loans are unsecured, currently interest free and have no fixed terms of repayment.

38


w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

15. Interest bearing liabilities

Citibank, N. A. 17 000 000 – 20 000 000 –The above loan is secured by a cession of debtors and a general notarial bond over inventory of Square One Solutions Group Limited. Interest is charged at prime overdraft lending rate less 2% and repayable in four years.

GAC Investment Holdings (Proprietary) Limited 1 154 411 – 1 780 983 –The above loan is unsecured, bears interest at rates linked to the prime overdraft lending rate and has no fixed terms of repayment.

Bytes Document Solutions (Proprietary) Limited – – 6 075 930 –This loan is unsecured, interest is charged at a fixed rate of 10% per annum and is repayable over two years.

Finance leases 146 782 232 215 289 283 299 603The finance leases are secured by financial lease agreements over certain of the fixed assets mentioned in note 2. These bear interest at rates linked to the prime overdraft rate, and are repayable in monthly instalments.

Less: Current portion of interest bearing liabilities (3 483 245) (95 753) (7 286 858) (199 603)

14 817 948 136 462 20 859 338 100 000

No limit is placed on the borrowing powers of Square One Solutions Group Limited and its subsidiaries as authorised by the company’s articles of association.

16. Provisions

Leave pay 265 285 241 168 287 562 261 419Warranty – – 831 860 –Other 72 007 – 177 290 –

337 292 241 168 1 296 712 261 419

17. Gross revenue

Gross revenue which excludes value-added tax represents the invoiced value of goods andservices supplied.

39



w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

18. Exceptional loss

Goodwill written off – – – 4 352 807

Provision for loss on subsidiary – – – 3 868 593

– – – 8 221 400

19. Operating profit

Operating profit is stated after charging:

Auditors' remuneration 50 541 192 000 180 530 271 693

Audit fee – current year 130 500 192 000 260 489 271 693

Prior year over-provision (79 959) – (79 959) –

Depreciation 711 321 800 572 905 836 1 962 366

Owned assets 571 213 623 155 671 644 1 769 168

Capitalised leased assets 140 108 177 417 234 192 193 198

Amortisation of intangible assets 265 440 – 635 890 4 352 807

Foreign exchange profits/(losses) (393 696) 3 540 531 (389 219) 1 198 526

Lease rentals – premises 1 232 424 1 557 758 1 915 186 1 788 891

20. Interest received

Interest income

Bank balances 110 385 138 490 127 260 207 583

Interest received from subsidiaries – 600 000 – 600 000

110 385 738 490 127 260 807 583

21. Finance costs

Bank overdrafts 2 875 164 3 138 123 3 411 572 4 152 038

Finance leases 22 596 – 50 832 –

2 897 760 3 138 123 3 462 404 4 152 038

40


w w w. s q 1 . c o . z a

22. Directors' remunerationServices as Performance Expense

Directors’ emoluments directors Basic salary bonuses allowances

2003Executive directorsG A Coetser – 480 000 – –T I Morrison – 43 950 – –W T James – 579 600 – –

Non-executive directorsB van Rooyen 5 000 – – –R T Muzariri 15 000 – – –

20 000 1 103 550 – –

2002Executive directorsG A Coetser – 374 271 – –T I Morrison – 75 372 – –S K Berryman – 26 556 – –W T James – 576 000 – –

Non-executive directorsR T Muzariri 5 000 – – –

5 000 1 052 199 – –

The directors did not receive any benefits and do not have any share options.

23. Shareholding of directors

The shareholding of directors in the issued share capital of the company as at 31 December 2003 wasas follows:

Beneficial Non-beneficial Total shareholdingDirect Indirect Direct Indirect Number %

31 December 2003Executive directorsG A Coetser – 7 104 689 – – 7 104 689 32W T James 3 895 2 289 712 – – 2 293 607 10T I Morrison – – – – – 0

Non-executive directorsB van Rooyen – – – – – 0R T Muzariri – – – – – 0

3 895 9 394 401 – – 9 398 296 42

The shareholding of directors in the issued share capital of the company as at 31 December 2002 wasas follows:

31 December 2002Executive directorsG A Coetser – 7 186 228 – – 7 186 228 33W T James 3 895 2 289 712 – – 2 293 607 10T I Morrison – 2 049 784 – – 2 049 784 9S K Berryman 80 000 – – – – 0

Non-executive directorsB van Rooyen – – – – – 0R T Muzariri – – – – – 0

83 895 11 525 724 – – 11 529 619 52

41



w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

24. Taxation

South African normal taxCurrent year 1 201 34 701 1 201 34 701

Deferred taxCurrent year – – 791 725 1 261 668

Reconciliation of rate of taxation % % % %South African normal tax rate 30,0 – 30,0 –

Adjusted for:Utilisation of computed tax losses – – 4,8 –

Net increase/(decrease) – – 4,8 –

Effective rate 30,0 – 34,8 –

25. (Loss)/earnings per share

Earnings/loss attributable to ordinary shareholders 2 803 (2 151 212) 1 342 127 103 419Amortisation of goodwill – – 369 041 4 352 807Loss on foreign subsidiary disposal – – – 3 868 593

Headline (loss)/earnings 2 803 (2 151 212) 1 711 168 8 324 819

Headline (loss)/earnings per share and (loss)/earnings per share are calculated on the weighted average number of ordinary shares in issue being 22 000 000. (2002: 22 000 000).

26. Segmental information

Business segmentsThe following table shows the distribution of the group's consolidated revenue by business segment:Document Solutions 9 627 106 15 802 912Knowledge and Information Management Solutions 6 155 423 48 455 558Coding and Marking Solutions 10 675 788 8 930 192Power Solutions (UPS) 22 235 829 26 012 012Consumables Solutions 34 639 542 65 585 707Services Solutions 8 088 090 9 265 782Activated Learning Group – 143 905

91 421 778 174 196 068

Geographical segmentsJohannesburg 43 262 079 114 487 805Cape Town 22 095 024 27 692 363Durban 8 563 894 10 685 817Port Elizabeth 7 662 634 9 702 685Pretoria 7 548 413 10 366 483Bloemfontein 2 289 734 1 260 915

91 421 778 174 196 068

42


w w w. s q 1 . c o . z a

Company Group

2003 2002 2003 2002

R R R R

27. Related party

27.1 Dealings with subsidiaries of the company

During the year under review thecompany and its subsidiaries, inthe ordinary course of business,entered into various sale andpurchase transactions with eachother. These transactionsoccurred under terms that areno less favourable than thosearranged with third parties, thatbeing at arm’s length.Service provided to subsidiaries 767 605 – – –Services provided by subsidiaries (1 069 473) – – –

27.2 Dealings with directors and other entities controlled by the company's directors

GAC Investment Holdings (Proprietary) Limited 767 605 – – –

27.3 Other

Loans and investments relatingto subsidiaries have beenidentified in note 4.

The company does not haveany associates or joint ventures.

The directors are listed in thedirectors' report.

Transactions that occurred with other companies in which the directors have an interest have been identified in note 15.

28. Shareholders' analysisNumber of % of shares Number of

shares held issued shareholders %

Range of shareholding1 – 50 000 1 101 287 5,02 167 87,43

50 001 – 100 000 932 847 4,24 13 6,81100 001 – 500 000 1 044 753 4,75 5 2,62500 001 + shares 18 921 113 86,01 6 3,14

22 000 000 100,00 191 100,00

Public and non-public shareholdingTotal non-public shareholders 17 259 946 78,45 9 4,71Public shareholders 4 740 054 21,55 182 95,29

22 000 000 100,00 191 100,00

43



w w w. s q 1 . c o . z a

28. Shareholders' analysis (continued)

Individual shareholders holding more than 5% Number of % of sharesas at 31 December 2003 shares held issued

G A Coetser 2 000 000 9,09GAC Investments Holdings Pty 7 072 189 32,15Oak Nominees Limited 5 725 150 26,02Dante Trust 2 049 784 9,32The James Trust 1 144 856 5,20The Jartay Trust 1 144 856 5,20

19 136 835 86,99

Company Group2003 2002 2003 2002

R R R R

29. Notes to the cash flow statement

29.1 Cash generated from/(utilised in) operations

Net profit/(loss) before taxation 4 004 (2 116 511) 2 276 846 1 760 863Adjustments for:Depreciation and amortisation 976 761 800 572 1 541 726 916 911Interest received (110 385) (738 490) (127 260) (807 583)Finance costs 2 897 760 3 138 123 3 462 404 4 152 038Goodwill less provision for loss on subsidiary – – – 9 390 323

3 768 140 1 083 694 7 153 716 15 412 552

Movements in working capitalDecrease in inventories 4 963 460 2 124 858 3 853 791 3 350 414(Increase)/decrease in accounts receivable (179 186) 15 969 739 2 337 010 7 389 820Increase/(decrease) in accounts payable and provisions 6 196 497 (21 971 235) (1 616 377) (9 109 584)

14 748 911 (2 792 944) 11 728 140 17 043 202

29.2 Reconciliation of taxation paid during year

Charge in income statement (1 201) (34 701) (792 926) (1 296 369)Movement in taxation balance 1 102 (251 059) (2 868 021) 1 108 358

Payments made (99) (285 760) (3 660 947) (188 011)

29.3 Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:Bank balances 989 709 637 041 839 432 1 193 422Bank overdrafts (788 630) (15 508 634) (138 043) (21 993 249)

201 079 (14 871 593) 701 389 (20 799 827)

44

NOTICE OF ANNUAL GENERAL MEETING

w w w. s q 1 . c o . z a

Notice is hereby given that the third annual general meeting of the Square One Solutions Limited will be held

at the offices of the company, First Floor, Eastgate Park, 8 Commerce Crescent West, Eastgate Extension 13,

Sandton, on Tuesday, 29 June 2004, at 12h00 for the transaction of the following business:

1. To receive and consider the annual financial statements for the year ended 31 December 2003.

2. To elect the directors who retire by rotation in terms of the company’s Articles of Association and being

eligible, offer themselves for re-election.

3. To reappoint the auditors and to authorise the directors to decide on the remuneration of the auditors for

the past year’s audit.

4. To consider, and if deemed fit, to pass with or without amendment the following ordinary resolution in

terms of Section 221 of the Companies Act and the Listings Requirements of the JSE Securities

Exchange South Africa:

That until the next annual general meeting of the company the unissued ordinary shares of the company

(excluding for the purpose the shares in respect of which the directors have been granted specific

authority in terms of the company share incentive scheme) be and are hereby placed under the control

of the directors to allot and issue such person or persons and on such terms and conditions and at such

times as the directors in their discretion may determine.

5. To transact such other business as may be dealt with at an ordinary general meeting.

A member entitled to attend and vote at the meeting may appoint a proxy (who need not be a member

of the company) to attend and speak and to vote in his/her stead. A form for the purpose of appointing

a proxy is included in the annual report.

Certificated shareholders and own-name dematerialised shareholders who are unable to attend the

general meeting but wish to be represented thereat must complete and return the attached form of proxy

in accordance with the instructions contained therein so as to be received by the transfer secretaries,

Ultra Registrars (Pty) Limited, PO Box 4844, Johannesburg 2000 by 12h00 on Monday, 28 June 2004.

Dematerialised shareholders, other than own-name dematerialised shareholders, who wish to attend the

general meeting must request their CSDP or broker to provide them with a Letter of Representation or

must instruct their CSDP or broker to vote by proxy on their behalf in terms of the agreement entered

into between the shareholder and their CSDP or broker in the manner and cut-off time stipulated therein.

By order of the Board.

A M Craddock

Company Secretary

30 May 2004

Printed by Ince (Pty) Ltd

FORM OF PROXY


w w w. s q 1 . c o . z a

The Square One Solutions Group Limited(Incorporated in the Republic of South Africa)

Registration number: 1999/026822/06

JSE Code: SQE

ISIN: ZAE000023768

To be completed by certificated shareholders and dematerialised shareholders with “own name”

registration only

I/We

(Name)

of

(Address)

Being a member of the Square One Solutions Group Limited

and the registered holder of ordinary shares

do hereby appoint

or, failing him/her, the chairman of the meeting as my proxy to vote for me and on my behalf at the third annual

general meeting of members of the company to be held on Tuesday, 29 June 2004 at 12h00, 1st floor,

East Block, Eastgate Park, 8 Commerce Crescent West, Eastgate Ext. 13, Sandton and at any adjournment

thereof, as follows:

For Against Abstain

1. Resolution approving the annual financial statements

2. Resolution re-electing those directors retiring by rotation

and confirmation of appointment of new directors

3. Resolution re-appointing the auditors and authorising

the directors to decide their remuneration

4. Resolution placing the unissued shares of the company

under the control of the directors

Signature Date

A member entitled to attend and vote at the above-mentioned meeting is entitled to appoint one or more

proxies (who need not be members of the company) to attend and vote in his/her stead.

The completion and lodging of this form of proxy will not preclude the relevant ordinary shareholder from

attending the annual general meeting and speaking and voting in person thereat instead of the proxy, should

the ordinary shareholder so wish.

Unless otherwise indicated in the appropriate spaces above, the proxy holder may vote or abstain at

his/her discretion.

This form must be completed, signed and returned to the company’s transfer secretaries: Ultra Registrars

(Pty) Limited, PO Box 4844, Johannesburg 2000 or to the group company secretary: A M Craddock,

PO Box 1163, Gallo Manor, 2052 or per fax to: (011) 444-2462, to be received at least 24 hours before

the meeting.

INSTRUCTIONS ON SIGNING AND LODGING THE ANNUALGENERAL MEETING PROXY FORM

w w w. s q 1 . c o . z a

1. A shareholder may insert the name(s) of two alternative proxies (neither of whom need be a shareholder

of the company) in the space provided, with or without deleting the words "chairman of the general

meeting". The person whose name stands first on the form of proxy and has not been deleted and who

is present at the annual general meeting will be entitled to act as proxy to the exclusion of those whose

names follow. In the event that no names are indicated, the proxy shall be exercised by the chairman of

the annual general meeting.

2. A shareholder’s instructions to the proxy must be indicated by the insertion of an "X" or the relevant

number of votes exercisable by that shareholder in the appropriate box/boxes provided. If a proxy form,

fully signed, is lodged without specific directions as to which way the proxy is to vote, the chairman of

the Annual General Meeting will be deemed to have been authorised as he/she thinks fit. A shareholder

or the proxy is not obliged to use all the votes exercisable by the shareholder or by the proxy.

3. A deletion of any printed matter and the completion of any blank spaces need not be signed or initialled.

Any alteration or correction must be initialled by the authorised signatory/ies.

4. When there are joint holders of shares, all joint shareholders must sign the form of proxy.

5. The completion and lodging of this form of proxy will not preclude the shareholder, who grants this proxy,

from attending the general meeting and speaking and voting in person thereat to the exclusion of any

proxy appointed in terms hereof, should such shareholder wish to do so.

6. Documentary evidence establishing the authority of the person signing this form of proxy in a

representative capacity must be attached to this form unless previously recorded by the transfer

secretaries.

7. Where this form is signed under power of attorney, such power of attorney must accompany this form

unless it has been previously registered with the company or the transfer secretaries.

8. A minor must be assisted by his/her parent or guardian unless the relevant document establishing his/her

legal capacity has been produced or registered by the transfer secretaries.

9. Completed forms of proxy must be forwarded to the company’s transfer secretaries, Ultra Registrars

(Pty) Limited, PO Box 4844, Johannesburg 2000 or to the group company secretary: A M Craddock,

PO Box 1163, Gallo Manor, 2052 or per fax to: (011) 444-2462 so as to be received at least 24 hours,

excluding Saturdays, Sundays and public holidays, before the Annual General Meeting.

BRANCH OFFICES


w w w. s q 1 . c o . z a

HEAD OFFICE

Square One Solutions Group Limited

Sandton, Johannesburg Branch

Eastgate Office Park, East Block,

8 Commerce Crescent West

Eastgate Ext. 13, Sandton

Tel: (011) 321-5900

Fax: (011) 444-2462

BRANCHES

Bloemfontein Branch

Suite 5, Oxford Building

154 Zastron Street

Bloemfontein

Tel: (051) 448-5451

Fax: (051) 448-5456

Cape Town Branch

9 Drake Street

Observatory, Cape Town

Tel: (021) 464-4000

Fax: (021) 448-3226

Durban Branch

36 Intersite Avenue

Umgeni Business Park

Umgeni, Durban

Tel: (031) 268-3900

Fax: (031) 263-0882

Port Elizabeth Branch

28 Pickering Street

Newton Park

Port Elizabeth

Tel: (041) 391-9200

Fax: (041) 364-0594

Pretoria Branch

1021 Pretorius Street

Hatfield, Pretoria

Tel: (012) 342-9046

Fax: (012) 342-9028

www.sq1.co.za

passion proactivity performance - sharedata · passion proactivity performance. contents vision 1...

Documents