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Audited results and withdrawal of cautionary announcement for the year ended 30 June 2012
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")
Audited results and withdrawal of cautionary announcement
for the year ended 30 June 2012
Highlights
- New business gained kept revenue flat despite certain key contract terminations
- Client Centric business model established
- Internal optimisation programme completed
- Debtors' securitisation funding programme extended
- Non-core business disposed
Summarised consolidated income statement
for the year ended 30 June 2012
Audited Audited
Notes 30 June 2012 30 June 2011
R'000 R'000
Revenue 2 530 068 2 566 582
Other operating income 9 708 3 553
Income 2 539 776 2 570 135
Loss before interest, tax, depreciation
and amortisation charges (EBITDA) (517) (211 807)
EBITDA before settlement and related expense (517) 162 140
Settlement and related expenses 4 (373 947)
Depreciation and amortisation charges (48 576) (46 358)
Operating loss 3 (49 093) (258 165)
Financial income 7 233 8 363
Financial expenses (29 423) (32 099)
Net financial expense (22 190) (23 736)
Loss before tax (71 283) (281 901)
Income tax 20 693 73 153
Loss after tax (50 590) (208 748)
Total loss attributable to:
Owners of the parent (50 785) (209 990)
Non-controlling interest 195 1 242
(50 590) (208 748)
Basic loss per ordinary share (cents) (5,28) (21,84)
Diluted loss per ordinary share (cents) (5,28) (21,76)
Headline loss per ordinary share (cents) (5,27) (21,73)
Diluted headline loss per ordinary share (cents) (5,27) (21,65)
Weighted average number of shares (000's) 961 565 961 565
Diluted number of shares (000's) 961 565 965 167
Number of shares in issue (000's) 961 565 961 565
Calculation of headline loss:
Loss attributable to owners of the parent (50 785) (209 990)
Loss on sale of property, plant and equipment
and intangible assets 168 1 415
Tax effect (47) (396)
Headline loss (50 664) (208 971)
Summarised consolidated statement of comprehensive income
for the year ended 30 June 2012
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
Loss for the year (50 590) (208 749)
Other comprehensive income/(loss)
Currency translation differences for foreign operations 2 844 (29 194)
Currency translation on the net investments for foreign operations 11 496 24 638
Income tax on other comprehensive income (34) (41)
Revaluation of land and buildings 3 839
Total comprehensive loss for the year (32 445) (213 345)
Total comprehensive loss attributable to:
Loss attributable to owners of the parent (32 640) (214 588)
Profit attributable to non-controlling interest 195 1 242
(32 445) (213 346)
Notes to the summarised consolidated financial statements
1 Statement of compliance
These summarised Gijima Group Limited (the Group') financial results for the year ended 30 June 2012 constitute
a summary, prepared in accordance with the JSE Limited Listings Requirements; the South African Companies Act
(Act 71 of 2008), as amended; and the recognition and measurement requirements of International Financial
Reporting Standards and the presentation and disclosure requirements of International Accounting Standard 34
and the AC 500 interpretation as issued by the Accounting Practice Board of SAICA, of the Group's audited financial
statements.
These summarised 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 2012.
This summarised announcement has been audited by the Company's auditors, KPMG Inc., who have expressed an
unqualified audit opinion.
Their audit report is available for inspection at the Company's registered office. The Company's 30 June 2012
results are available to the user on the Company's website: www.gijima.com
The summarised consolidated financial statements have been prepared by Pierre Joubert, CA(SA), the Group
Manager, Financial Accounting.
These summarised consolidated annual financial statements were approved by the Board of Directors on
25 September 2012.
2 Significant accounting policies
The accounting policies applied by the Group in these summarised consolidated annual 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.
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
3 Operating loss
The following material items have been included
in the calculation of operating loss:
Exchange rate (losses)/gains on translation of foreign currency (11 577) 3 343
Loss on sale of intangibles and property, plant and equipment (168) (1 415)
(11 745) 1 928
4 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 Ltd and the Department of Home Affairs regarding
the Who am I Online contract. The impact of the direct settlement and related expenses have been included in the
operating loss for the year ended 30 June 2011.
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
Settlement expenses (357 740)
Settlement-related expenses (16 207)
Gross settlement cost (373 947)
Deferred tax 104 705
Net of tax (269 242)
5 Business establishment
The MineRP division in Canada expanded its operations to Turkey and Chile. Two new subsidiaries, MineRP Eurasia
and MineRP Latin America, were established. The subsidiaries' operations will involve providing mining consulting
services and software and forms part of the Professional Services segment. Establishment of the operations will
enable the Group to expand its international operations and market share mining consulting services and software
in Europe/Asia and Latin America.
MineRP eurasia MineRP Latin america
Date of establishment 31 August 2011 30 May 2012
Group shareholding acquired 99,99% 99%
Revenue contribution to Group's results R8,6 million R0,750 million
6 Contingent liabilities
At 30 June 2012 the Group had contingent liabilities in respect of registered performance bonds, bank lease and
other guarantees to the value of R28,8 million (June 2011: R5,3 million).
Summarised consolidated segmental analysis
for the year ended 30 June 2012
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
Revenue
Professional Services 1 059 048 949 810
Managed Services 1 498 102 1 648 085
Revenue from external customers 2 557 150 2 597 895
Internal revenue adjustment (27 082) (31 313)
Consolidated revenue 2 530 068 2 566 582
Segment results
Professional Services 25 209 (6 911)
Managed Services 10 692 144 964
Settlement expenses (357 740)
Retrenchment cost (43 678)
Settlement-related expenses (16 207)
Unallocated expenses (63 506) (46 007)
Other corporate expenses (52 893) (25 614)
Exchange rate gains on translation
of foreign currency 11 577 3 343
Net financial expense (22 190) (23 736)
Consolidated loss before tax (71 283) (281 901)
Summarised consolidated statement of financial position
as at 30 June 2012
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
ASSETS
Non-current assets 408 276 387 227
Property, plant and equipment 89 828 81 621
Intangible assets 141 799 154 163
Trade and other receivables 18 213 17 301
Deferred tax assets 158 436 134 142
Current assets 696 535 825 210
Inventories 34 459 26 506
Trade and other receivables 539 887 693 666
Current tax assets 919 16 211
Cash and cash equivalents 121 270 88 827
Total assets 1 104 811 1 212 437
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 232 902 265 542
Non-controlling interest (3 010) (3 205)
Non-current liabilities 371 887 237 403
Interest-bearing liabilities 301 980 152 729
Operating lease liability 19 336 23 778
Amounts due to vendors 2 463
Deferred tax liabilities 50 571 58 433
Current liabilities 503 032 712 697
Trade and other payables 464 359 552 194
Short-term borrowings 150 000
Operating lease liability 4 451 3 607
Provisions 28 020 2 931
Bank overdrafts 4 235 2 352
Amounts due to vendors 1 967 1 613
Total equity and liabilities 1 104 811 1 212 437
Summarised consolidated statement of cash flows
for the year ended 30 June 2012
Audited Audited
30 June 2012 30 June 2011
R'000 R'000
Cash flows from operating activities
Cash generated from/(utilised in) operations before
working capital changes 36 120 (16 625)
Working capital changes 48 014 (104 643)
Net financial expense (13 690) (25 627)
Interest received 7 214 9 316
Interest paid (20 904) (34 943)
Dividend paid (24 039)
Tax refund/(paid) 3 300 (35 400)
Net cash generated from/(used in) operating activities 73 744 (206 334)
Cash flows from investing activities
Purchase of intangible assets (7 577) (15 242)
Purchase of property, plant and equipment (33 172) (21 799)
Decrease in amounts due to vendors (1 686) (2 090)
Business acquired (10 000)
Net cash used in investing activities (42 435) (49 131)
Cash flows from financing activities
Repayment of short-term borrowings (150 749) (1 676)
Increase in interest-bearing borrowings 150 000
Increase in finance liability 3 699
Net cash (used in)/generated from financing activities (749) 2 023
Net increase/(decrease) in
cash and cash equivalents 30 560 (253 442)
Cash and cash equivalents
at the beginning of the year 86 475 339 917
Cash and cash equivalents
at the end of the year 117 035 86 475
Summarised consolidated statement of changes in equity
for the year ended 30 June 2012
Non- Non-
Share Share Distributable distributable controlling Total
capital premium reserves reserves Total interest equity
Group R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 July 2010 961 641 710 (81 601) (59 450) 501 620 (4 447) 497 173
Loss for the year (209 990) (209 990) 1 242 (208 748)
Other comprehensive income/(loss)
Currency translation differences (29 235) (29 235) (29 235)
Currency translation on net investments 24 638 24 638 24 638
Total comprehensive (loss)/income for the year (209 990) (4 597) (214 587) 1 242 (213 345)
Transactions with owners, recorded directly in equity
Share-based payment transactions 2 548 2 548 2 548
Dividend paid (24 039) (24 039) (24 039)
Own shares acquired
Total transactions with owners (21 491) (21 491) (21 491)
Balance at 30 June 2011 961 641 710 (313 082) (64 047) 265 542 (3 205) 262 337
Loss for the year (50 785) (50 785) 195 (50 590)
Other comprehensive income
Currency translation differences 2 810 2 810 2 810
Revaluation of land and buildings 3 839 3 839 3 839
Currency translation on net investments 11 496 11 496 11 496
Total comprehensive (loss)/income for the year (50 785) 18 145 (32 640) 195 (32 445)
Transactions with owners recorded directly in equity
Share-based payment transactions
Total transactions with owners
Balance at 30 June 2012 961 641 710 (364 396) (45 373) 232 902 (3 010) 229 892
Review of Results
Gijima is one of South Africa's leading Information, Communication and Technology (ICT) Services groups and has a Level 2 AAA empowerment
rating. 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.
The Company's results for the 12 months ended 30 June 2012 were significantly impacted by the cost of establishing its client centric business
model, the loss of two significant contracts as well as the cost of an internal optimisation programme.
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 re-organisation, Gijima has appointed several senior leading IT industry executives to drive the
various client centric initiatives. The cost of establishing the client centric model amounted to R22,3 million.
A significant contract was lost and a material portion of another key contract was insourced during the 12 months ended 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 these services is expected to be issued for SAPS in the near future that will replace the current month-to-month
agreement. Gijima is well positioned to respond to this tender.
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 by 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 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 costs of rationalising the business in line with these contract terminations were borne in the year ended 30 June 2012.
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 of R38,3 million is reflected in the results for the year ended 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.
Despite the significant contract terminations during the financial year, the Group's revenue ended the 12 months to 30 June 2012 largely
in line with the revenue reported in the previous financial year ended 30 June 2011. The revenue lost has been made up by gains in other areas.
Earnings before interest, tax, depreciation and amortisation ended the year at a loss of R517 000.
The Professional Services Division performed well and recorded revenue growth of 11.5% on the previous year. A profit of R25,2 million
was achieved, compared to last year's reported loss of R6,9 million, a positive turn-around of R32,1 million. The Systems Integration unit
has delivered a much improved performance from last year and is successfully deploying some substantial projects. The performance
of the ERP business was in line with that of the previous financial year and 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. 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.
Revenue for the Managed Services Division was significantly down on last year. This division was the most significantly impacted by the
two contract losses. The Unified Communications, Data Centre and Security businesses 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. Revenue and profit of the Distributed Computing business were significantly impacted by the contracted losses.
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.
The Group incurred a non-cash foreign exchange rate translation loss of R11,6 million during the period which is predominantly due to
the accounting consolidation of its foreign operations. Depreciation and amortisation was marginally higher than the prior year as capital
expenditure remained largely unchanged. The net financial expense ended the period at 6.5% less due to lower borrowing costs.
Gijima's effective tax rate of 29.0% is in line with the statutory norm. The deferred tax asset of R158,4 million includes a calculated tax loss of
R88,3 million which will be utlised in the foreseeable future.
The Group's net cash balances increased from the previous financial year to R117,0 million. Despite significant costs incurred to establish
the new business model and to optimise the business, Gijima generated R84,1 million in cash from operations for the year, of which
R48,0 million arose from positive working capital management. The Group has secured the extension of its long-term debtors' securitisation
funding programme. Investors in R150 million Class A2 secured debentures that matured on 30 June 2012 have subscribed for a new issue of
R150 million class A debentures with a duration of five years and a maturity date of 30 June 2017. The R150 million class A1 debentures, which
are scheduled to mature on 30 June 2015, remain in issue and are unaffected by the extension of the programme for a further five-year period.
Gijima's debt to equity ratio ended the year at 133%. The ratio is expected to improve to well below 100% after conclusion of the disposal of
the MineRP business (see below). The current ratio measures at 1.4 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.
Post-balance sheet date events
1. Disposal of non-core business post-balance sheet date
Gijima has concluded the terms of agreements relating to the potential disposal of the Company's mining technology and consulting
businesses (MineRP Businesses), to a consortium led by RMB Corvest (Pty) Ltd, a subsidiary of RMB Private Equity (Pty) Ltd. MineRP would
be housed in a newly incorporated entity, Oakleaf Investment Holdings 89 (Pty) Ltd. The agreements will be subject to conditions precedent,
including the approval of the Competition Authorities.
The Board has identified MineRP as non-core and, as MineRP requires considerable investment to maintain its competitive position, has
resolved to dispose thereof in order to preserve MineRP's value and realise maximum value for Gijima shareholders.
2. The pro forma financial effects of the disposal of the MineRP Businesses
The table below sets out the unaudited pro forma financial effects of the transaction based on the audited annual results for the year ended
30 June 2012. The unaudited pro forma financial effects have been prepared for illustrative purposes only, in order to provide information
about how the transaction might have affected shareholders had the transaction been implemented on the dates indicated in the notes below.
Due to their nature, the unaudited pro forma financial effects may not fairly present the financial position or the effect on future earnings of
Gijima after the transaction.
Audited Unaudited Percentage
12 months ended Pro forma after increase/
30 June 2012 the transaction (decrease)
(Loss)/earnings per share (cents) (5,28) 11,94 >100
Diluted (loss)/earnings per share (cents) (5,28) 11,94 >100
Headline loss per share (cents) (5,27) (5,49) (4,17)
Diluted headline loss (cents) (5,27) (5,49) (4,17)
Net asset value per share (cents) 23,91 35,04 46,55
Net tangible asset value per share (cents) 0,42 12,32 >100
Weighted average number of shares in issue ('000) 961 565 961 565 0,00
Diluted weighted average number of shares in issue ('000) 961 565 961 565 0,00
Notes:
1. The audited financial information has been extracted without adjustment from the published financial statements of Gijima for the 12 months
ended 30 June 2012.
2. The pro forma adjustments to the statement of comprehensive income have been calculated on the assumption that the transaction took
place on 1 July 2011 and include the following:
a. a reduction in the interest expense amounting to R12,5 million post-tax resulting from the use of the proceeds of the disposal
Consideration to repay a portion of the securitisation loans. This adjustment will have a continuing effect on Gijima's statement of
comprehensive income;
b. the reversal of the income and expenditure relating to the MineRP Businesses;
c. the reversal of the income and expenditure relating to MineRP Africa's 50% interest in Sirius Consulting, a joint venture company. This
adjustment will have a continuing effect on Gijima's statement of comprehensive income (Gijima proportionately consolidates Sirius);
d. the elimination of specific corporate cost amounting to R9,1 million (post-tax) which have already been incurred by Gijima and which
will not form part of Gijima's annual cost structure subsequent to the implementation of the disposal as these costs relate specifically
to the MineRP Businesses. These adjustments will have a continuing effect on Gijima's statement of comprehensive income;
e. the expensing of the transaction costs of R5,6 million (post-tax). This adjustment will not have a continuing effect on Gijima's statement
of comprehensive income;
f. profit on the transaction amounting to R167,7 million (post-tax). This adjustment will have a continuing effect on Gijima's statement of
comprehensive income;
g. realisation of the foreign exchange gain previously accounted for in the statement of comprehensive income of R36,4 million. This
adjustment will have a continuing effect on Gijima's statement of comprehensive income; and
h. recognition of a deferred tax expense of R11,7 million as a result of the reversal of foreign exchange from other comprehensive income.
This adjustment will have a continuing effect on Gijima's statement of comprehensive income.
3. The pro forma adjustments to the statement of financial position have been calculated on the assumption that the disposal took place on
30 June 2012 and include the following:
a. the receipt of the disposal Consideration and the proceeds of the Repayment amounting to R175 million:
i. R138,5 million utilised to repay the AUD16,5 million through the international structure to Gijima Holdings, a wholly-owned
subsidiary of Gijima Group Limited; and
ii. the disposal consideration amounting to R36,5 million, then being used to settle transaction costs and the repayment of inter-Group
loans which do not form part of the transaction;
b. the reversal of the assets and liabilities relating to the MineRP Businesses;
c. the reversal of the assets and liabilities relating to MineRP Africa's 50% interest in Sirius Consulting, a joint venture company;
d. the expensing of the transaction costs of R5,6 million (post-tax);
e. profit on the transaction amounting to R167,7 million (post-tax);
f. the repayment of the inter-Group loans that do not form part of the transaction amounting to R2 million; and
g. recognition of a deferred tax liability of R11,7 million as a result of the reversal of foreign exchange from other comprehensive income.
3. Withdrawal of cautionary to the potential disposal
Gijima shareholders are referred to the cautionary announcements dated 25 April 2012, 8 June 2012, 19 July 2012, 30 August 2012 and
5 September 2012, respectively, and the terms announcement on 25 September 2012. Shareholders are advised that a further
announcement setting out the salient dates and times relating to the transaction will be made in due course on posting of the circular, given
that shareholders' approval will be required to implement the transactions (a "Circular" setting out the details required by the JSE Listings
Requirements and incorporating a notice convening a general meeting to approve the transactions). Shareholders are hereby advised that
the cautionary is withdrawn.
Changes to the board of directors
DM Zwane-Chikura resigned on 2 March 2012. Dr MHR Bussin was appointed as a director on 2 March 2012.
Prospects
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 is confident that the remedial actions taken have positioned the Company for
an improved performance.
RW Gumede PJ Bogoshi CJH Ferreira
Non-executive Chairman Chief Executive Officer Chief Financial Officer
26 September 2012
Directors: Registered Office:
RW Gumede (Non-executive Chairman) 47 Landmarks Avenue, Kosmosdal, Samrand, South Africa
PJ Bogoshi (Chief Executive Officer) (012) 675 5000
CJH Ferreira (Chief Financial Officer) Transfer Secretaries:
Dr MHR Bussin, M Macdonald*, JE Miller*, AFB Mthembu* Link Market Services South Africa (Proprietary) Limited
JCL van der Walt*, AH Trikamjee*, VN Fakude* (Registration number 2000/007239/07)
* Non-executive 13th Floor, Rennie House
19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000)
Gijima Group Limited
Company Secretary: (previously Gijima Ast Group Limited)
Ithemba Governance and Statutory Solutions (Pty) Ltd Registration number 1998/021790/06
Monument Office Park, Block 5, Share code: GIJ ISIN: ZAE000147443
Suite 102 79 Steenbok Avenue, Monument Park ("Gijima" or "the Group" or "the Company")
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
www.gijima.com/IR_2012
Date: 26/09/2012 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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