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GIJIMA GROUP LIMITED - Anaudited Group interim report for the period ended 31 December 2012

Release Date: 28/03/2013 16:28
Code(s): GIJ     PDF:  
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Anaudited Group interim report for the period ended 31 December 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")

Unaudited Group interim report for the period ended 31 December 2012

Condensed consolidated income statement
for the period ended 31 December 2012
                                                                    Unaudited        Restated       Restated
                                                                  31 December     31 December        30 June
                                                                         2012            2011           2012
                                                                  (six months)    (six months)    (12 months)
                                                          Note          R'000           R'000          R'000
Continuing operations
Revenue                                                               911 207       1 186 508      2 219 239
Other operating income                                                    400           2 636          8 621
Income                                                                911 607       1 189 144      2 227 860
(Loss)/earnings before interest, tax, depreciation
 and amortisation charges (EBITDA)                                   (100 260)         56 742        (26 319)
EBITDA before reclassification of net investment                      (97 764)         56 742        (26 319)
Reclassification of currency translation on
 net investments                                                       (2 496)                            
Depreciation and amortisation charges                                 (23 100)        (23 356)       (45 777)
Operating (loss)/profit                                     3        (123 360)         33 386        (72 096)
Financial income                                                        1 010           3 670          6 353
Financial expenses                                                    (19 476)        (15 730)       (29 314)
Net financial expense                                                 (18 466)        (12 060)       (22 961)
(Loss)/profit before tax                                             (141 826)         21 326        (95 057)
Income tax                                                             35 621          (8 387)        25 444
(Loss)/profit for the period from
 continuing operations                                               (106 205)         12 939        (69 613)
Discontinued operations
Profit from discontinued operation, net of tax                         82 471          15 628         19 023
Net loss/(profit) before reclassification of currency
 translation of net investments and profit on
 disposal of business                                                  (9 529)         15 628         19 023
Profit on disposal of business                                         63 479                             
Reclassification of currency translation of net
 investments due to disposal of business                               41 332                             
Tax effect on adjustments                                             (12 811)                            

(Loss)/profit for the period                                          (23 734)         28 567        (50 590)
Total (loss)/profit attributable to:
Owners of the parent                                                  (24 411)         29 800        (50 785)
Non-controlling interest                                                  677          (1 233)           195
                                                                      (23 734)         28 567        (50 590)
Weighted average number of shares (000's)                             961 565         961 565        961 565
Diluted number of shares (000's)                                      961 565         961 565        961 565
Number of shares in issue (000's)                                     961 565         961 565        961 565
Earnings per share
Basic (loss)/earnings per ordinary share (cents)                        (2,54)           3,10          (5,28)
Diluted (loss)/earnings per ordinary share (cents)                      (2,54)           3,10          (5,28)
Headline (loss)/earnings per ordinary share (cents)                    (10,58)           3,11          (5,27)
Diluted headline (loss)/earnings
 per ordinary share (cents)                                            (10,58)           3,11          (5,27)
Calculation of headline earnings/(loss)
(Loss)/profit attributable to owners of the parent                    (24 411)         29 800        (50 785)
Profit on disposal of business                                        (63 479)                            
Reclassification of currency translation on
  net investments                                                     (38 836)                            
Tax effect of reclassification on net investments                      24 819                             
Loss on sale of property, plant and equipment                             199             175            168
Tax effect                                                                (56)            (49)           (47)
Headline (loss)/earnings                                             (101 764)         29 926        (50 664)
Earnings per share  continuing operations
(Loss)/profit attributable to:
Owners of the parent                                                 (106 882)         14 172        (69 808)
Non-controlling interest                                                  677          (1 233)           195
                                                                     (106 205)         12 939        (69 613)
Basic (loss)/earnings per ordinary share (cents)                       (11,12)           1,47          (7,26)
Diluted (loss)/earnings per ordinary share (cents)                     (11,12)           1,47          (7,26)
Headline (loss)/earnings per ordinary share (cents)                     (9,59)           1,49          (7,25)
Diluted headline (loss)/earnings per ordinary share
 (cents)                                                                (9,59)           1,49          (7,25)
Calculation of headline (loss)/earnings
(Loss)/profit attributable to owners of the parent                   (106 882)         14 172        (69 808)
Reclassification of currency translation
  on net investments                                                    2 496                             
Tax effect on reclassification on net investments                      12 009                             
Loss on sale of property, plant and equipment                             188             152             98
Tax effect                                                                (53)            (43)           (27)
Headline (loss)/earnings                                              (92 242)         14 281        (69 737)

Condensed consolidated statement of comprehensive income
for the period ended 31 December 2012
                                                                    Unaudited       Unaudited        Audited
                                                                  31 December     31 December        30 June
                                                                         2012            2011           2012
                                                                        R'000           R'000          R'000
(Loss)/profit for the period                                          (23 734)         28 567        (50 590)
Other comprehensive income
Currency translation differences for foreign operations                39 361           2 849          2 844
Currency translation on the net investments
  for foreign operations                                               13 342          10 861         11 496
Reclassification of currency translation on investments
  for foreign operations                                              (39 190)                            
Revaluation of property, plant and equipment                                                         3 839
Income tax on other comprehensive income                                 (452)         (4 925)           (34)
Total comprehensive (loss)/income for the period                      (10 673)         37 352        (32 445)
Total comprehensive (loss)/income attributable to:
(Loss)/profit attributable to owners of the parent                    (11 350)         38 585        (32 640)
Profit/(loss) attributable to non-controlling interest                    677          (1 233)           195
                                                                      (10 673)         37 352        (32 445)

Notes to the condensed consolidated financial statements

1      Statement of compliance
   
       The condensed Group unaudited interim financial statements are prepared and presented in accordance with the
       JSE Limited (JSE) 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 Financial Reporting Guide as issued by the
       Accounting Practices Committee of SAICA.
   
       These condensed consolidated financial statement's 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.
   
       The condensed unaudited consolidated financial statements have been prepared by Pierre Joubert, CA(SA), the Group
       Manager, Financial Accounting.
   
       These condensed unaudited consolidated annual financial statements were approved by the Board of Directors on
       22 March 2013.

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 2012.

                                                                        Unaudited         Restated         Restated
                                                                      31 December      31 December          30 June
                                                                             2012             2011             2012
                                                                            R'000            R'000            R'000
3      Operating (loss)/profit
       The following material items have been included in the
       calculation of operating profit:
       Continuing operations
       Exchange rate gains/(losses) on translation
        of foreign currency                                                   532           (8 503)         (8 972)
       Exchange rate loss on reclassification of currency
        translation on net investments                                     (2 496)                              
       Reversal of an accrual                                                              35 970          35 970
       Loss on sale of property, plant and equipment                         (188)            (152)            (98)
       Discontinued operations
       Exchange rate losses on translation of foreign currency             (1 063)          (1 006)         (2 605)
       Exchange rate gain on reclassification of currency
        translation on net investments                                     41 332                               
       Profit on disposal of business                                      63 479                               
       Losses on sale of property, plant and equipment                        (11)             (23)            (70)
                                                                          101 585           26 286          24 225

4      Disposal of subsidiaries
   
       In November 2012 Gijima sold its mining technology and consulting businesses (MineRP Businesses). The MineRP
       Businesses was not classified as a discontinued operation at 30 June 2012, and the comparative condensed
       consolidated income statements have been restated to show the discontinued operation separately from
       the continuing operations. The Board and Executive Committee committed to a plan to sell the MineRP Businesses
       early in the 2013 financial year and was subject to key approvals for the sale to be valid such as the Competition
       Commission and JSE approval. All approvals were completed on 9 November 2012.

                                                                      31 December      31 December         30 June
                                                                             2012             2011            2012
                                                                            R'000            R'000           R'000
       Effect of discontinued operation on the condensed
       consolidated income statement:
       Revenue                                                             86 017          150 117         310 829
       Expenses                                                          (102 568)        (129 945)       (287 826)
       Results from operating activities                                  (16 551)          20 172          23 003
       Net financial income                                                   107              502             771
       Results from operating activities, after financial
       expenses                                                           (16 444)          20 674          23 774
       Taxation                                                             6 915           (5 046)         (4 751)
       Results from operating activities, net of tax                       (9 529)          15 628          19 023
       Gain on sale of business                                            63 479                               
       Reclassification of currency translation on net investments         41 332                               
       Taxation on reclassification of net investments                    (12 811)                              
       Profit for the period                                               82 471           15 628          19 023
       Basic earnings per ordinary share (cents)                             8,58             1,63            1,98
       Diluted earnings per ordinary share (cents)                           8,58             1,63            1,98
       Headline (loss)/earnings per ordinary share (cents)                  (0,99)            1,63            1,98
       Diluted headline (loss)/earnings per ordinary share
        (cents)                                                             (0,99)            1,63            1,98
       Cash flows from discontinued operations:
       Net cash generated from operating activities                        15 559           31 460           8 315
       Net cash generated from/(used in) investing activities             151 134           (3 275)         (5 803)
       Effect on cash flows                                               166 693           28 185           2 512
       Effect of discontinued operation on the condensed
       consolidated statement of financial position:
       Property, plant and equipment                                       (7 121)
       Intangible assets                                                   (1 387)
       Deferred tax assets                                                 (5 169)
       Inventories                                                           (757)
       Trade and other receivables                                        (48 257)
       Current tax assets                                                  (7 071)
       Cash and cash equivalents                                          (22 679)
       Deferred tax liabilities                                                70
       Trade and other payables                                            31 618
       Currency translation differences                                   (50 768)
       Net assets and liabilities                                        (111 521)
       Consideration received, satisfied in cash                          175 000
       Cash and cash equivalents disposed of                              (22 679)
       Net cash inflow                                                    152 321
       Consideration received                                             175 000
       Net assets and liabilities                                        (111 521)
       Profit on disposal of business                                      63 479
       Recycling of net investment on disposal of business                 41 332
       Profit before tax on disposal of business                          104 811
       Tax on recycling of net investment on disposal of business         (12 811)
       Profit on disposal of business                                      92 000

5      Contingent liabilities
   
       At 31 December 2012 the Group had contingent liabilities in respect of registered performance bonds, bank lease and
       other guarantees to the value of R17,5 million (30 June 2012: R28,8 million).

6      Segment analysis
       From 1 July 2012 Gijima formally changed to a new reporting structure which comprises mainly System Engineering
       and Services which is a change from previously reported Professional and Managed Services. As a result the
       segmental analysis have been restated.

Condensed consolidated segmental analysis
for the period ended 31 December 2012
                                                                        Unaudited        Restated        Restated
                                                                      31 December     31 December         30 June
                                                                             2012            2011            2012
                                                                            R'000           R'000           R'000
Revenue
 Systems Engineering                                                      109 280         278 269         431 593
 Services                                                                 569 012         738 480       1 433 171
 Discrete Solutions                                                       240 789         183 529         381 557
 MineRP Businesses                                                         86 017         150 117         310 829
                                                                        1 005 098       1 350 395       2 557 150
 Elimination of discontinued operations                                   (86 017)       (150 117)       (310 829)
 Internal revenue adjustment                                               (7 874)        (13 770)        (27 082)
 Consolidated revenue                                                     911 207       1 186 508       2 219 239
Segment results
 Systems Engineering                                                     (132 853)           (574)        (60 061)
 Services                                                                   8 591          54 352          21 156
 Discrete Solutions                                                        21 753          11 891          29 407
 MineRP Businesses                                                         82 335          11 422             901
    MineRP Businesses segment results                                     (22 476)         11 422             901
    Reclassification of currency translation on net investments
     as part of disposal of business                                       41 332                              
    Profit on disposal of business                                         63 479                              
 Consolidated segment results                                             (20 174)         77 091          (8 597)
 Discontinued operations                                                  (89 323)        (21 178)        (25 608)
    Elimination of discontinued operations                                 15 488         (21 178)        (25 608)
    Elimination of reclassification of currency translation
     on net investments as part of disposal of business                   (41 332)                             
    Elimination of profit on disposal of business                         (63 479)                             
                                                                         (109 497)         55 913         (34 205)
Unallocated expenses                                                      (32 329)        (34 587)        (60 852)
 Other corporate expenses                                                 (11 899)        (14 024)        (28 919)
 Reclassification of currency translation of net investments               (2 496)                             
 Exchange rate gains/(losses) on translation                                  532          (8 503)         (8 972)
 Net financial expense                                                    (18 466)        (12 060)        (22 961)
Consolidated (loss)/profit before tax of continuing operations           (141 826)         21 326         (95 057)

Condensed consolidated statement of financial position
as at 31 December 2012
                                                              Unaudited      Unaudited       Audited
                                                            31 December    31 December       30 June
                                                                   2012           2011          2012
                                                                  R'000          R'000         R'000
ASSETS
Non-current assets                                              401 538        354 450       408 276
Property, plant and equipment                                    77 013         84 657        89 828
Intangible assets                                               131 245        147 965       141 799
Trade and other receivables                                                                 18 213
Deferred tax assets                                             193 280        121 828       158 436
Current assets                                                  550 690        820 538       696 535
Inventories                                                      39 195         27 602        34 459
Trade and other receivables                                     421 988        591 857       539 887
Current tax assets                                                  436            187           919
Cash and cash equivalents                                        89 071        200 892       121 270

Total assets                                                    952 228      1 174 988     1 104 811
EQUITY AND LIABILITIES
Equity attributable to owners of the parent                     221 552        304 370       232 902
Non-controlling interest                                         (2 333)        (4 438)       (3 010)
Non-current liabilities                                         336 677        225 499       371 887
Interest-bearing liabilities                                    256 501        152 291       301 980
Operating lease liability                                        18 697         20 761        19 336
Amounts due to vendors                                                          1 019             
Deferred tax liabilities                                         61 479         51 428        50 571
Current liabilities                                             396 332        649 557       503 032
Trade and other payables                                        365 378        480 809       464 359
Short-term borrowings                                                         150 000             
Operating lease liability                                         2 066          5 294         4 451
Provisions                                                       28 888          2 158        28 020
Bank overdrafts                                                                 1 792         4 235
Amounts due to vendors                                                          1 613         1 967
Current tax liabilities                                                         7 891             

Total equity and liabilities                                    952 228      1 174 988     1 104 811

Condensed consolidated statement of cash flows
for the period ended 31 December 2012
                                                              Unaudited      Unaudited       Audited
                                                            31 December    31 December       30 June
                                                                   2012           2011          2012
                                                                  R'000          R'000         R'000
Cash flows from operating activities
Cash (used in)/generated from operations before
 working capital changes                                       (114 101)        94 293        36 120
Working capital changes                                          21 866         42 521        48 014
Net financial expense                                           (25 051)       (11 276)      (13 690)
 Interest received                                                1 169          4 522         7 214
 Interest paid                                                  (26 220)       (15 798)      (20 904)
Dividend paid                                                                                    
Tax paid                                                         (5 898)        10 866         3 300
Net cash (used in)/generated from operating activities         (123 184)       136 404        73 744
Cash flows from investing activities
Purchase of intangible assets                                    (1 097)        (3 433)       (7 577)
Purchase of property, plant and equipment                        (8 610)       (18 222)      (33 172)
Decrease in amounts due to vendors                               (1 915)        (1 686)       (1 686)
Proceeds from the disposal of business                          175 000                           
Cash and cash equivalents from disposal of business             (22 679)                          
Net cash generated from/(used in) investing activities          140 699        (23 341)      (42 435)
Cash flows from financing activities
Repayment of short-term borrowings                                 (479)          (438)     (150 749)
Repayment of interest-bearing borrowings                        (45 000)                          
Increase in short-term loans                                                               150 000
Increase in finance liability                                                                    
Net cash used in financing activities                           (45 479)          (438)         (749)
Net (decrease)/increase in cash and cash equivalents            (27 964)       112 625        30 560
Cash and cash equivalents at the beginning of the period        117 035         86 475        86 475
Cash and cash equivalents at the end of the period               89 071        199 100       117 035

Condensed consolidated statement of changes in equity
for the period ended 31 December 2012
                                                         Share       Share  Distributable    Non-distributable                 Non-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 2011                                     961     641 710       (313 082)             (64 047)    265 542              (3 205)   262 337
 Profit/(loss) for the period                                                    29 800                          29 800              (1 233)    28 567
Other comprehensive income
 Currency translation difference                                                                      2 849       2 849                       (15 517)
 Currency translation on net investments                                         (4 925)              10 861       5 936                         5 936
Total comprehensive income for the period                                        24 875               13 710      38 585              (1 233)    37 352
Transactions with owners, recorded directly in equity
 Share-based payment transactions                                                   243                             243                           243
Total transactions with owners                                                      243                             243                           243
Balance at 31 December 2011                                961     641 710       (287 964)             (50 337)    304 370              (4 438)   299 932
 Loss for the period                                                            (80 585)                        (80 585)              1 428    (79 157)
Other comprehensive income                                                                                                                        
 Currency translation differences                                                                       (39)        (39)                          (39)
 Revaluation of building                                                                              3 839       3 839                         3 839
 Currency translation on net investments                                          4 925                  635       5 560                         5 560
Total comprehensive income for the period                                       (75 660)               4 435     (71 225)              1 428    (69 797)
Transactions with owners, recorded directly in equity
 Share-based payment transactions                                                  (243)                           (243)                         (243)
Total transactions with owners                                                     (243)                           (243)                         (243)
Balance at 30 June 2012                                    961     641 710       (363 867)             (45 902)    232 902              (3 010)   229 892
 (Loss)/profit for the period                                                   (24 411)                        (24 411)                677    (23 734)
Other comprehensive income/(loss)
 Currency translation differences                                                                    38 909      38 909                        38 909
 Currency translation on net investments                                                            (25 848)    (25 848)                      (25 848)
Total comprehensive loss for the period                                         (24 411)              13 061     (11 350)                677    (10 673)
Balance at 31 December 2012                                961     641 710       (388 278)             (32 841)    221 552              (2 333)   219 219

FINANCIAL RESULTS

The Company experienced a challenging six months, with revenue from continuing operations down 23% from
the prior reporting period. This followed the loss and insourcing of two significant contracts during the second
half of the previous financial year; limited new revenue opportunities in a tough market; and top-line pressure
on a major project.

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. However, the new model has not yet
yielded the desired levels of revenue generation.

The loss from continuing operations incurred during the period is a direct consequence of the pressure on
the Company's revenue line. The implementation of initiatives to fix the Company's cost base commenced in
November 2012 and is expected to be finalised before the end of the current financial year.

The Company has incurred expenditure of some R47 million during the interim reporting period on a major
project without recognising revenue. Differences over pricing methodology and scoping on this project have
now been resolved with our customer.

The disposal of the Company's mining technology and consulting businesses (MineRP) to a consortium led by
RMB Corvest Proprietary Limited, a subsidiary of RMB Private Equity Proprietary Limited, was concluded on
12 November 2012 for a cash consideration of R175 million.

The change in the Company operating model has resulted in a shift in the primary reporting view from
Professional and Managed Services to that of Systems Engineering and Services. The Systems Engineering
division houses the Company's various project environments, including custom and packaged solutions, as well
as infrastructure projects. The Services division is responsible for the various support environments, including
field operations, business applications, infrastructure support and the integrated service centre. All other
focused businesses are grouped under our Solutions division, including our training and placement business,
our voice business, our Namibian operation as well as MineRP up to the date of its disposal.

The Systems Engineering division experienced a disappointing six months and performed well below
expectation. Revenue dropped by 61% and a loss of R132,8 million was recorded against last year's break-
even level. The results of Systems Engineering were significantly impacted by the major project referred to above
that did not generate revenue during the period under review. New business in this environment was hampered
by tough market conditions.

Revenue of the Services division ended 24% lower than last year, predominantly as a result of the loss and
insourcing of two significant contracts during the second half of the previous financial year. Margins in this
environment remained depressed. These are however expected to improve as the cost base is fixed during
the second half of the year to align with the revenue generated by the Services division. The performance
notwithstanding, the year was also marked by significant contract renewals, ensuring that our traditionally high
levels of annuity business is maintained.

The Solutions division (continuing operations) delivered an excellent performance and achieved revenue
growth of 31% from last year. Operating profit of this division improved by 83%. The training and placement
business reported a solid performance, growing both its revenue and profit lines from last year. Our voice
business performed exceptionally well, re-affirming the strategy to move the business to the Solutions division
to allow focus on its core competencies. Our Namibian operation in addition disclosed excellent growth and
profitability for the six-month reporting period.

The main features of the Company's results from continuing operations are as follows:

                                      31 December 2012  31 December 2011
                                           (Six months)      (Six months)     Variance
Continuing operations                            R'000             R'000    % decrease
Revenue                                        911 207         1 186 508           (23)
Operating (loss)/profit                       (123 360)           33 386          (469)
Headline (loss)/earnings per share               (9,59)             1,49          (746)
(Loss)/earnings per share                       (11,12)             1,47          (854)

No dividend has been declared for the period.

Investors and shareholders are referred to the cautionary announcement dated 28 March 2013 regarding the
intended recapitalisation of Gijima through a fully underwritten rights offer in order to strengthen the balance sheet
of Gijima and ensure sufficient capitalisation to meet its funding covenants and ongoing trading requirements.

On behalf of the Board

RW Gumede	                                   EA Wilton 	                                         CJH Ferreira
Non-executive Chairman	                     Interim Chief Executive Officer	                    Chief Financial Officer
28 March 2013

Directors:                                                      Sponsor:
RW Gumede (Non-executive Chairman)*                             RAND MERCHANT BANK
PJ Bogoshi (Chief Executive Officer)^                           (A division of FirstRand Bank Limited)
CJH Ferreira (Chief Financial Officer)                          Registered Office:
EA Wilton (Interim Chief Executive Officer)+                    47 Landmarks Avenue, Kosmosdal, Samrand, South Africa
Dr MHR Bussin*, M Macdonald*, JE Miller*#, AFB Mthembu*,        (012) 675 5000
JCL van der Walt*, AH Trikamjee*, N Fakude*                     Transfer Secretaries:
* Non-executive                                                 Link Market Services South Africa Proprietary Limited
^ Resigned 26 September 2012, effective 31 December 2012        (Registration number 2000/007239/07)
+ Appointed 9 October 2012 as Interim Chief Executive Officer   13th Floor, Rennie House
  and alternate director                                        19 Ameshoff Street, Braamfontein, 2001
# Resigned 26 November 2012                                     (PO Box 4844, Johannesburg, 2000)

Company Secretary:                                              Gijima Group Limited
Ithemba Governance and Statutory Solutions                      (previously Gijima Ast Group Limited)
Proprietary Limited                                             Registration number 1998/021790/06
Monument Office Park, Block 5                                   Share code: GIJ     ISIN: ZAE000147443
Suite 102, 79 Steenbok Avenue, Monument Park, 0181              ("Gijima" or "the Group" or "the Company")

www.gijima.com/IR_2012



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