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GIJ - Gijima Group Limited - Unaudited interim results for the six months ended
31 December 2011
Gijima Group Limited
(previously Gijima Ast Group Limited)
Registration number 1998/021790/06
Share code: GIJ ISIN: ZAE000147443
("Gijima" or "the Group" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
Highlights
Revenue up 7,5%
Cash generated R136 million
Return on equity 30%*
Level 2 AAA empowerment rating
*Rolling 12-month after-tax returns
Condensed consolidated income statement
for the period ended 31 December 2011
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
(six months) (six months) (12 months)
Notes R`000 R`000 R`000
Revenue 1 336 625 1 243 714 2 566 582
Other operating income 3 723 390 3 553
Income 1 340 348 1 244 104 2 570 135
Earnings/(Loss) before 78 200 (331 342) (211 807)
interest, tax,
depreciation and
amortisation charges
(EBITDA)
EBITDA before settlement 78 200 42 605 162 140
and related expense
Settlement and related 5 - (373 947) (373 947)
expenses
Depreciation and (24 642) (22 339) (46 358)
amortisation charges
Operating profit/(loss) 4 53 558 (353 681) (258 165)
Financial income 4 220 5 495 8 363
Financial expenses (15 778) (18 624) (32 099)
Net financial expense (11 558) (13 129) (23 736)
Profit/(Loss) before tax 42 000 (366 810) (281 901)
Income tax (13 433) 95 986 73 153
Profit/(Loss) for the 28 567 (270 824) (208 748)
period
Total profit/(loss)
attributable to:
Owners of the parent 29 800 (271 789) (209 990)
Non-controlling interest (1 233) 965 1 242
28 567 (270 824) (208 748)
Basic earnings/(loss) per 3,10 (28,25) (21,84)
ordinary share (cents)
Diluted earnings/(loss) 3,10 (28,14) (21,76)
per ordinary share (cents)
Headline earnings/(loss) 3,11 (28,24) (21,73)
per ordinary share (cents)
Diluted headline 3,11 (28,13) (21,65)
earnings/(loss) per
ordinary share (cents)
Weighted average number of 961 565 962 071 961 565
shares (`000)
Diluted number of shares 961 565 965 860 965 167
(`000)
Number of shares in issue 961 565 961 565 961 565
(`000)
Calculation of headline
earnings/(loss)
Profit/(Loss) attributable 29 800 (271 789) (209 990)
to owners of the parent
Loss on sale of businesses 175 74 1 415
and property, plant and
equipment
Tax effect (49) (21) (396)
Headline earnings/(loss) 29 926 (271 736) (208 971)
Condensed consolidated statement of comprehensive income
for the period ended 31 December 2011
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Profit/(Loss) for the period 28 567 (270 824) (208 748)
Other comprehensive income
Currency translation differences 2 849 (15 490) (29 194)
for foreign operations
Currency translation on the net 10 861 8 100 24 638
investments for foreign
operations
Income tax on other (4 925) (27) (41)
comprehensive income
Total comprehensive 37 352 (278 241) (213 345)
income/(loss) for the period
Total comprehensive
income/(loss) attributable to:
Profit/(Loss) attributable to 38 585 80 272 (214 587)
owners of the parent
(Loss)/Profit attributable to (1 233) - 1 242
non-controlling interest
37 352 80 272 (213 345)
Notes to the condensed consolidated financial statements
1 Statement of compliance
The condensed Group interim financial statements are prepared and presented in
accordance with International Financial Reporting Standards ("IFRS")in
particular the International Accounting Standard IAS 34: Interim Financial
Reporting, and South African Statements and Interpretations of Statements of
Generally Accepted Accounting Practice (AC 500 Series), and the requirements of
the Companies Act 2008 of South Africa.
These condensed consolidated financial statements do not include all of the
information required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group as at and
for the year ended 30 June 2011.
The Company`s December 2011 results are available to the user on the Company`s
website: www.gijima.com
The condensed consolidated interim financial statements have been prepared by
Pierre Joubert, CA(SA), the Group Manager, Financial Accounting. These condensed
consolidated interim financial statements were approved by the Board of
Directors on 17 February 2012.
2 Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
interim financial statements are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 30 June 2011.
3 Dividend paid
No dividends were declared or paid during the six months ended 31 December 2011.
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
4 Operating profit/(loss)
The following material items
have been included in the
calculation of operating
profit:
Exchange rate (losses)/gains on (9 509) 5 395 3 343
translation
Reversal of an accrual 35 970 - -
Loss on sale of property, plant (175) (74) (1 415)
and equipment
26 286 5 321 1 928
5 Dispute settlement
The following material items relate to costs incurred by Gijima as part of a
settlement agreement between Gijima Holdings (Pty) Ltd, a wholly-owned
subsidiary of Gijima Group Limited, and the Department of Home Affairs (DHA)
regarding the Who Am I Online (WAIO) contract. The impact of the direct
settlement and related expenses have been included in the operating loss for the
periods ended 31 December 2010 and 30 June 2011.
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Settlement expenses - (357 740) (357 740)
Settlement-related expenses - (16 207) (16 207)
Gross settlement cost - (373 947) (373 947)
Deferred tax - 104 705 104 705
Net of tax - (269 242) (269 242)
6 Contingent liabilities
At 31 December 2011 the Group had contingent liabilities in respect of
registered performance bonds, bank lease and other guarantees to the value of
R2,7 million (June 2011: R5,3 million).
7 Business establishment
On 31 August 2011 the GMSI division in Canada expanded its operations to Turkey.
A new subsidiary, MineRP Eurasia, was established. The subsidiary`s operations
will involve providing mining consulting services and software. Gijima Group
Limited has a 99,99% shareholding in MineRP Eurasia. Establishment of the
operations will enable the Group to expand its international operations and
market share mining consulting services and software in Europe/Asia.
In the six months ended 31 December 2011, MineRP Eurasia contributed R6,3
million in revenue and R0,9 million to the Group`s results.
Investment in MineRP Eurasia was financed by GijimaAst Americas Inc issuing
share capital of 25 Turkish Lira with a share premium of 7 975 Turkish Lira.
Condensed consolidated segmental analysis
for the period ended 31 December 2011
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Revenue
Professional Services 557 502 441 489 949 810
Managed Services 792 893 818 508 1 648 085
1 350 395 1 259 997 2 597 895
Internal revenue adjustment (13 770) (16 283) (31 313)
Consolidated revenue 1 336 625 1 243 714 2 566 582
Segment results
Professional Services 36 420 (37 729) (6 911)
Managed Services 40 670 62 208 144 964
Settlement expenses - (357 740) (357 740)
Settlement-related expenses - (16 207) (16 207)
Unallocated expenses (35 090) (17 342) (46 007)
Other corporate expenses (14 024) (9 608) (25 614)
Exchange rate (losses)/gains on (9 508) 5 395 3 343
translation
Net financial expense (11 558) (13 129) (23 736)
Consolidated profit/(loss) before 42 000 (366 810) (281 901)
tax
Condensed consolidated statement of financial position
as at 31 December 2011
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 354 450 346 118 387 227
Property, plant and equipment 84 657 82 733 81 621
Intangible assets 147 965 131 274 154 163
Trade and other receivables - - 17 301
Deferred tax assets 121 828 132 111 134 142
Current assets 820 539 758 181 825 210
Inventories 27 602 49 913 26 506
Trade and other receivables 591 857 574 697 693 666
Current tax assets 187 418 16 211
Cash and cash equivalents 200 892 133 153 88 827
Total assets 1 174 988 1 104 299 1 212 437
EQUITY AND LIABILITIES
Equity attributable to owners of 304 370 199 880 265 542
the parent
Non-controlling interest (4 438) (3 482) (3 205)
Non-current liabilities 225 499 367 678 237 403
Interest-bearing liabilities 152 291 300 237 152 729
Operating lease liability 20 761 28 037 23 778
Amounts due to vendors 1 019 4 174 2 463
Deferred tax liabilities 51 428 35 230 58 433
Current liabilities 649 557 540 223 712 697
Trade and other payables 480 809 529 386 552 194
Short-term borrowings 150 000 - 150 000
Operating lease liability 5 294 - 3 607
Provisions 2 158 3 489 2 931
Bank overdrafts 1 792 2 978 2 352
Amounts due to vendors 1 613 2 068 1 613
Current tax liabilities 7 891 2 302 -
Total equity and liabilities 1 174 988 1 104 299 1 212 437
Condensed consolidated statement of cash flows
for the period ended 31 December 2011
Unaudited Reviewed Audited
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from/(used in) 94 293 (116 952) (16 625)
operations before working capital
changes
Working capital changes 42 521 (34 272) (104 643)
Net financial expense (11 276) (13 092) (25 627)
Interest received 4 522 6 210 9 316
Interest paid (15 798) (19 302) (34 943)
Dividend paid - (24 039) (24 039)
Tax paid 10 866 (12 027) (35 400)
Net cash generated from/(used in) 136 404 (200 382) (206 334)
operating activities
Cash flows from investing
activities
Purchase of software (3 433) (13) (15 242)
Purchase of property, plant and (18 222) (6 788) (21 799)
equipment
Decrease in amounts due to vendors (1 686) (2 090) (2 090)
Business acquired - - (10 000)
Net cash used in investing (23 341) (8 891) (49 131)
activities
Cash flows from financing
activities
Repayment of short-term borrowings (438) (469) (1 676)
Increase in finance liability - - 3 699
Net cash (used in)/generated from (438) (469) 2 023
financing activities
Net increase/(decrease) in cash 112 625 (209 742) (253 442)
and cash equivalents
Cash and cash equivalents at the 86 475 339 917 339 917
beginning of the period
Cash and cash equivalents at the 199 100 130 175 86 475
end of the period
Condensed consolidated statement of changes in equity
for the period ended 31 December 2011
Non-
Share Share Distributable distributable
capital premium reserves reserves
Group R`000 R`000 R`000 R`000
Balance at 1 July 961 641 710 (81 601) (59 450)
2010
(Loss)/Profit for the (271 789) -
period
Other comprehensive
income
Currency translation - - - (15 517)
differences
Currency translation - - - 8 100
on net investments
Total comprehensive - - (271 789) (7 417)
income for the period
Transactions with
owners, recorded
directly in equity
Share-based payment - - 1 505 -
transactions
Dividend paid - - (24 039) -
Total transactions - - (22 534) -
with owners
*Balance at 31 961 641 710 (375 924) (66 867)
December 2010
Profit for the period - - 61 799 -
Other comprehensive
income
Currency translation - - - (13 718)
differences
Currency translation - - - 16 538
on net investments
Total comprehensive - - 61 799 2 820
income for the period
Transactions with
owners, recorded
directly in equity
Share-based payment - - 1 043 -
transaction
Total transactions - - 1 043 -
with owners
+Balance at 30 June 961 641 710 (313 082) (64 047)
2011
Profit/(Loss) for the - - 29 800 -
period
Other comprehensive
income
Currency translation - - - 2 849
differences
Currency translation - - (4 925) 10 861
on net investments
Total comprehensive - - 24 875 13 710
loss for the period
Transactions with
owners, recorded
directly in equity
Share-based payment - - 243 -
transactions
Total transactions - - 243 -
with owners
#Balance at 31 961 641 710 (287 964) (50 337)
December 2011
* Audited
+ Reviewed
# Unaudited
Non-
controlling Total
Total interest equity
Group R`000 R`000 R`000
Balance at 1 July 501 620 (4 447) 497 173
2010
(Loss)/Profit for the (271 789) 965 (270 824)
period
Other comprehensive
income
Currency translation (15 517) - (15 517)
differences
Currency translation 8 100 - 8 100
on net investments
Total comprehensive (279 206) 965 (278 241)
income for the period
Transactions with
owners, recorded
directly in equity
Share-based payment 1 505 - 1 505
transactions
Dividend paid (24 039) - (24 039
Total transactions (22 534) - (22 534)
with owners
*Balance at 31 199 880 (3 482) 196 398
December 2010
Profit for the period 61 799 277 62 076
Other comprehensive
income
Currency translation (13 718) - (13 718)
differences
Currency translation 16 538 - 16 538
on net investments
Total comprehensive 64 619 277 64 896
income for the period
Transactions with
owners, recorded
directly in equity
Share-based payment - - -
transaction
Total transactions 1 043 - 1 043
with owners
+Balance at 30 June 265 542 (3 205) 262 337
2011
Profit/(Loss) for the 29 800 (1 233) 28 567
period
Other comprehensive
income
Currency translation 2 849 - 2 849
differences
Currency 5 936 - 5 936
translation on net
investments
Total comprehensive 38 585 (1 233) 37 352
loss for the period
Transactions with
owners, recorded
directly in equity
Share-based payment 243 - 243
transactions
Total transactions 243 - 243
with owners
#Balance at 31 304 370 (4 438) 299 932
December 2011
* Audited
+ Reviewed
# Unaudited
Review of results
Gijima is one of South Africa`s leading Information, Communication and
Technology (ICT) Services groups. It offers end to end Managed Infrastructure
and Professional Services from its 80 points of presence within Southern Africa
and its operations in Australia, Asia, North and South America.
Results for the six-month period ended 31 December 2011 reflect a turnaround
back to profitability after the significant prior year write off relating to the
Department of Home Affairs` disputed Who Am I Online contract settlement. The
Group has recorded an improved operating performance in what remains a
relatively sluggish market.
Revenue increased by 7,5% from the comparative period in the previous year, with
Earnings before Interest, Tax, Depreciation and Amortisation reflecting an 83,5%
increase on the comparable prior year number (without the once-off settlement
charge). The attained margin of 5,8%, whilst below the Group`s targeted margin
levels, reflects the improving business performance.
Gijima`s BBBEE scorecard rating improved from a Level 3 AA rating to Level 2 AAA
during the period.
The Professional Services Division had an outstanding six months and recorded
revenue growth of 26,3% on the previous year. A profit of R36,4 million was
achieved, compared to last year`s reported loss of R37,7 million, a positive
swing of R74,1 million. The Systems Integration unit, which was particularly
impacted by the DHA settlement last year, has delivered a much improved
performance and is successfully deploying some substantial projects. The ERP
business also showed excellent growth, with significant new SAP project
implementations during the period. The pipeline for this line of business
remains healthy. The mining technical solutions business produced very strong
results, with a marked improvement in the top and bottom line for the half-year.
Its industry leading MineRP set of products continues to gain global market
share. Gijima`s training and placement business also produced considerable
revenue and profit growth for the six months.
Revenue for the Managed Services Division was marginally down for the period
with profit down 35%. This decline is attributed to the Unified Communications,
Data Centre and Security units which had a relatively muted performance due to
low sales volumes. The investment cost of our expansion into the data centre
Enterprise System Management software market further reduced profitability for
the division. The Distributed Computing business showed respectable top line
growth and maintained relatively healthy margins through its favourable services
mix and continuous optimisation drive. Gijima continues to expand its mobility
offerings and, although the contribution from this area is still small at
present, we anticipate that this will be an area of considerable growth going
forward.
Our revenue from the Industrial (mining and manufacturing) sector grew by 8,5%
over the period, with growth of 6,9% to Financial Services clients and 6% in
Public Services.
A significant investment has been made in converting Gijima`s operating model
from a product or business unit centric structure, to a client centric
structure. This meant changing certain senior management roles to focusing on
industry expertise, rather than technical ability alone. In the six-month period
approximately R18 million was expensed in costs associated with this
restructuring.
The Group incurred a non-cash forex loss of R8,6 million during the period which
is predominantly due to the consolidation of its foreign operations.
Depreciation and amortisation was 10% higher than the prior year, due to the
capital investment in new hardware and software technologies. The net financial
expense ended the period at 12% less due to lower borrowing costs.
Gijima`s effective tax rate of 32,0% is above the statutory norm due to a loss
incurred in our Namibian subsidiary that is not deducted in our tax computation.
The deferred tax asset of R121,8 million includes a calculated tax loss of R55,8
million.
The Group`s net cash balances increased significantly to R199,1 million. Gijima
generated R136,4 million in cash from operating activities for the six months,
of which R42.5 million arose from positive working capital management. As part
of the Group`s trade receivables securitisation programme of R300 million, R150
million of the debentures issued are due to expire in June 2012. The Group
anticipates rolling this debt forward well before the expiry date. The balance
expires in June 2015.
Gijima`s debt to equity ratio is 101% after having increased due to the
settlement charges incurred in the prior year. The current ratio measures at 1,2
times.
Dividends
No dividend has been declared for the period. The resumption of payment of
dividends will be reviewed by the Board in future, based on the Group`s trading
at the time.
Prospects
Compound annual growth rates of up to 9,5% are predicted for the ICT services
market through to 2015, compared to the 8,5% growth experienced over the last
year. Maintain, Support and Upgrade, Managed Services and Hosting services
contributed significantly to this growth with 26,4%, 26,1% and 19,0% growth,
respectively. The growth going forward is being driven by an increasing
optimisation drive across the economy, prompting the outsourcing of non-core IT
activities with the view to drive down cost. The convergence of IT and Telecoms,
along with the rapid upgrades and refreshing of technology, is also driving the
IT growth. The mobility wave should not be ignored, which is also being heavily
influenced by executives adoption along with Bring Your Own Device philosophies
being increasingly adopted across enterprise.
Gijima`s organisational restructure has been completed, with phase two
commencing in the second half of the year. This will focus on creating an
organisation that aligns with the core competencies required to deliver on
Gijima`s objectives and vision. This phase will include, but not limited to,
aspects such as cultural re-alignment along with efficiency drives. As a
technology organisation regular re-invention is critical not only to dominate a
market but also to remain relevant to customers.
Gijima places tremendous focus on its primary asset, its people. Gijima`s focus
is to ensure that it is able to attract, develop and retain the best skills
available. It has established a relationship with the University of the Western
Cape to provide B.Comm Honours programmes on its Samrand Campus. This is
supported by an annual Gordon Institute of Business Science programme run for
the emerging leadership within the Company. Gijima also provides a number of
internship programmes for young talent, with a view to providing a healthy
foundation of skills for the future.
Gijima is building a strong mobility capability, which is supported by the
recent announcement of its Apple System`s integration partnership, along with
its relationship with MobileIron, a mobile device management company. These
relationships along with internal development of mobility offerings will ensure
that Gijima establishes a strong presence in the market where it concerns
mobility offerings for enterprise.
RW Gumede PJ Bogoshi CJH Ferreira
Non-executive Chief Executive Chief Financial
Chairman Officer Officer
21 February 2012
Directors:
RW Gumede (Non-executive Chairman)
PJ Bogoshi (Chief Executive Officer)
CJH Ferreira (Chief Financial Officer)
DM Zwane-Chikura (Chief Operating Officer)
M Macdonald*
JE Miller*
AFB Mthembu*
JCL van der Walt*
AH Trikamjee*
N Fakude*
* Non-executive
Registered Office:
47 Landmarks Avenue, Kosmosdal, Samrand, South Africa
(012) 675 5000
Company Secretary:
Ithemba Governance and Statutory Solutions (Pty) Ltd
Monument Office Park, Block 5, Suite 102
79 Steenbok Avenue, Monument Park
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Transfer Secretaries:
Link Market Services South Africa (Proprietary) Limited
(Registration number 2000/007239/07)
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Date: 21/02/2012 07:05:01 Supplied by www.sharenet.co.za
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