Wrap Text
GIJ - Gijima Group Limited - Trading update and reminder of cautionary
announcement
GIJIMA GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1998/021790/06
Share code: GIJ
ISIN: ZAE000147443
("Gijima" or "the Company" or "the Group")
TRADING UPDATE AND REMINDER OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Gijima is approaching its closed period for the year ending 30 June 2012.
Shareholders have been made aware of various events that have taken place since
the announcement of the Company`s interim results in February 2012, namely the
loss of the SITA SAPS contract, the insource of a significant portion of the
Absa contract, as well as an optimisation programme. In order to provide context
to the upcoming full-year results, shareholders are advised to take cognisance
of those events that are expected to have a material impact on the Company`s
results for the twelve months ending 30 June 2012.
Shareholders are also advised to take notice of the cautionary announcement
issued on 25 April 2012 and renewed on 8 June 2012.
CLIENT CENTRICITY
The Company has completed the implementation of its new structure and its
business model has been altered to reflect an organisation where client
centricity is the primary focus. This positioning will allow for improved
industry and client understanding to better translate solutions that
differentiate it from its peers. As part of the reorganisation, Gijima has
appointed several senior leading IT industry executives to drive the various
client centric initiatives. The results for the twelve months ending 30 June
2012 will reflect the cost of establishing the client centric business model,
and in particular recruitment fees, retrenchment costs and the cost of external
advisory teams.
CONTRACTS LOST AND BUSINESS INSOURCED
A significant contract was lost and a material portion of another contract was
insourced during the twelve months ending 30 June 2012, significantly impacting
on the Company`s revenue and profit.
Gijima had been rendering hardware break-fix services to the South African
Police Services ("SAPS") since 2002. Following the expiry of the latest three-
year term of the SITA 433 Contract in 2009, Gijima and SITA entered into several
short-term extensions thereof, culminating in a month-to-month agreement for the
provision of the services from November 2011. These short-term arrangements were
in place whilst SITA conducted the tender process for the award of a subsequent
three-year contract for the break-fix services to SAPS. On 25 January 2012,
Gijima received notification from SITA that a new service provider would take
over the month-to-month provision of services from 1 February 2012. Gijima has
been working with SAPS for many years and has delivered in accordance with the
contract in question. A new tender for Remote Infrastructure Managed Support is
expected to be issued for SAPS in the near future that will replace the current
month-to-month agreement. Gijima will respond to this tender. We have in the
meantime completed the rationalisation of the team that serviced the SAPS
account.
Gijima has rendered several outsource services to Absa over the past ten years
and has delivered in accordance with these contracts. A portion of the desktop
services contract with Absa has been insourced back to Absa from 1 April 2012 in
accordance with the global policy of its major shareholder. Gijima will continue
to deliver on the remainder of this contract. Almost 180 employees, specifically
dedicated to working on the insourced part of the contract, have been
transitioned back to Absa as permanent employees of the bank. Gijima continues
to work with Absa in other areas and has already been invited to tender for new
business.
The cost of rationalising the business in line with these contract terminations
were borne in the year ending 30 June 2012.
Despite these significant contract terminations during the financial year, the
Group expects to deliver a similar level of revenue to that reported in the
previous financial year ended 30 June 2011. The revenue lost has been made up by
gains in other areas.
OPTIMISATION PROGRAMME
Gijima launched an internal optimisation programme in February 2012, aimed at
improving the Company`s efficiency and reducing its cost base. People
initiatives were prioritised to firstly address the contractor base of the
Company, and subsequently on reducing the number of its permanent employees. The
Company`s headcount, once the programme has been completed, is expected to
reduce by some 700 employees from the 3,902 employees at the start of the
financial year. Of this reduction, approximately 200 employees reduced were
through retrenchment, with the balance of the reduction coming from the Absa
insource, contractor terminations and natural attrition. The cost of the people
optimisation, that has largely been finalised, will be reflected in the results
for the year ending 30 June 2012.
The optimisation programme also focused on non-people cost saving initiatives,
addressing expenditures around its internal Information Management and Supply
Chain disciplines, as well as other operating expenses.
FUTURE
Despite these financial impacts, Gijima has invested to position the Group for
stability, consolidation and growth. New generation services in the areas of
mobility and cloud are starting to bear fruit. Gijima`s mobility framework,
which includes Mobile Device Management, application development along with the
ability to integrate into existing legacy platforms is complete, and the market
has begun to show good interest in the solutions. Gijima`s end-to-end security
offerings are being positioned to target the significant pain-points being felt
by large organisations today, particularly in the financial services industry.
These new generation services will also provide useful impetus to Gijima`s
traditional strength in the infrastructure space.
Despite the challenges in the 2012 financial year, management are confident that
the remedial actions taken have positioned the Company for a solid and
profitable performance in the 2013 financial year.
REMINDER OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement dated 25 April 2012 and renewed on 8 June
2012, shareholders are advised that negotiations are still in progress which, if
successfully concluded, may have a material effect on the price of Gijima
shares. Accordingly, shareholders are advised to continue exercising caution
when dealing in Gijima shares until a full announcement is made.
Samrand
28 June 2012
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 28/06/2012 09:52:01 Supplied by www.sharenet.co.za
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