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GIJ
GIJ
GIJ - Gijima AST - Unaudited Interim Results For the Six Months Ended 31
December 2008
GIJIMA AST GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1998/021790/06
Share code: GIJ
ZAE000064606
("GijimaAst" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Highlights
- Revenue up by 25% to R1,5 billion
- EBITDA (before exchange rate gains and losses) up by 67% to R129 million
- Net cash balances up by 158% to R336 million
OVERVIEW
GijimaAst is a leading South African Group which operates in the information and
communication technology (ICT) services sector. Organised in two operational
Strategic Business Units, namely Managed Services and Professional Services, we
offer end to end infrastructure management and professional services.
GijimaAst has recorded another pleasing set of interim results for the six
months ended 31 December 2008. The Group`s revenue growth of 25% resulted in
earnings before interest, tax, depreciation, amortisation charges and exchange
rate fluctuations growth of 67%. This is evidence that the Group`s strategy of
maximising shareholder value by focusing on Profitable Growth, Market
Leadership, Service Excellence and being an Employer of Choice in the ICT
industry is gaining traction.
Whilst this strategy remains the backdrop of the Group`s initiatives, during the
review period the Group implemented a plan to mitigate against the uncertainties
of the anticipated economic downturn. The focus of this plan was to contain
expenditure, maximise cash holdings and tightly manage working capital. This
resulted in the cash holdings of the Group increasing by R165 million to R336
million.
During the period under review the Group retained its AA (level 3) empowerment
rating by Empowerdex, the economic empowerment rating agency. The Group complied
with all seven pillars of the Black Economic Empowerment scorecard requirements,
making it one of the few listed IT companies with this rating.
OPERATIONAL REVIEW
Financial commentary
Our 25% increase in revenue to R1,5 billion (2007 R1,2 billion) was achieved
primarily through the strong growth of 60% in the Professional Services
division. This division secured significant new business over the period.
Operating profit advanced 136% in Professional Services due to the successful
roll-out of various large projects and enhanced margins achieved. Managed
Services continues to improve its operating margin with a 48% profit increase,
despite muted revenue growth.
GijimaAst`s operating profits are impacted by exchange rate gains and losses on
consolidation of its wholly-owned intercompany loan accounts denominated in
foreign currencies. These gains and losses do not have any impact on the Group`s
cash flow or operations. The volatility in foreign currency movements
experienced during the six months ended 31 December 2008 resulted in the
inclusion of a R32 million exchange rate loss for the period, compared to an
exchange rate gain of R7 million reported in the comparative reporting period.
Should the impact of exchange rate translation gains and losses be eliminated in
the current and comparative reporting periods, GijimaAst`s normalised earnings
per share for the six months ended 31 December 2008 would have improved by 92%
(applying the statutory tax rate of 28%).
EBITDA margin (before exchange rate gains and losses) increased from 6,4% for
the comparative period to 8,6% in the current period. The increased margin was
achieved through continuous cost containment and economies of scale benefits
realised through increased revenue.
The Group`s income tax expense includes a provision of R5,2 million for the
proposed settlement of a prior year tax dispute.
Cash generated from operations before working capital changes increased by 91%
as a result of the improved operating performance of the business. The enhanced
working capital focus of the Group resulted in a positive working capital inflow
of R65 million and a healthy growth in cash balances, which was augmented by the
accessing of an additional R100 million on the Group`s debtor securitisation
programme. The original debentures under the debtor securitisation program of
R256 million were issued for a five year term that expires in July 2011. The
additional R100 million raised during the period under review is secured for a
five year term expiring in December 2013. Funding of this R100 million for the
first year of the five year term was sourced from funds expiring in December
2009. The Group took the view that it would access additional cash reserves to
see it through the anticipated tightening credit markets over the next 12
months. The Group`s current ratio has increased significantly from 1,59 times to
1,92 times.
Innovation and continuous improvement
During the period under review, the Group continued with the standardisation of
its business processes. We invested R11,3 million on the upgrade of our SAP ERP
system. We also furthered the implementation of our ITIL unified framework for
service management for R11 million. The Group invested a further R2 million on
leadership development and R1 million on the Project Management Office. Most of
the Gauteng operations were consolidated into an enlarged Head Office campus
which required an investment of R15 million.
Industry review
We have heightened our industry focus including financial services, retail,
manufacturing, mining and public sector. Our efforts in each sector are led by
our industry executives, supported by sales specialists. Four years ago
GijimaAst made a decision to create unique capability and increase its exposure
to infrastructure projects, in anticipation of significant future rollouts in
both the private and public sectors. This strategy has begun to yield benefits
and has resulted in the public sector revenue increasing from 19% in 2005 to 43%
for the review period.
PROSPECTS
The ICT industry in South Africa has become increasingly challenging with client
sectors like mining reducing capital spend. It is however projected that IT
expenditure will grow at a compound annual growth rate (CAGR) of 9.7% in the
next five years, with IT services in particular growing at a CAGR of 11.7%. This
is driven primarily by government infrastructure spending and technology refresh
cycles. GijimaAst is relatively well positioned to weather the economic storm
due to increased public sector infrastructure spending and large annuity and
services revenue streams.
The economic downturn has forced many companies to review IT expenditure and
evaluate ways to be more effective and efficient. This augurs well for IT
service providers who can innovate and can deploy alternative flexible service
delivery models.
The skills shortage remains one of the biggest inhibitors of growth in the
industry. The expected retrenchments by certain companies have not had a
significant impact on the gap between the supply and demand of skills, more so
the high level technical skills. GijimaAst continues to invest in developing
these requisite skills together with its ecosystem partners that comprise
tertiary institutions and technology vendors.
RW Gumede PJ Bogoshi CJH Ferreira
Non-executive Chairman Chief Executive Chief Financial
Officer Officer
4 March 2009
Condensed consolidated income statement
for the period ending 31 December 2008
Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
(6 months) (6 months) (12 months)
Notes R`000 R`000 R`000
Revenue 1 494 334 1 193 635 2 514 741
Other operating 1 170 6 412 12 500
income
Income 1 495 504 1 200 047 2 527 241
Earnings before 128 606 76 865 156 007
interest, tax,
depreciation,
amortisation
charges and
exchange rate
(losses)/gains on
translation
Exchange rate (32 127) 6 730 47 811
(losses)/gains on
translation
Earnings before 96 479 83 595 203 818
interest, tax,
depreciation and
amortisation
charges (EBITDA)
Depreciation and (16 317) (15 343) (32 548)
amortisation
charges
Operating profit 4 80 162 68 252 171 270
Financial income 5 326 5 361 14 354
Financial expense (14 763) (13 601) (26 909)
Net financial (9 437) (8 240) (12 555)
expense
Profit before tax 70 725 60 012 158 715
Income tax expense 5 (29 048) (17 941) (46 510)
Profit for the 41 677 42 071 112 205
period
Attributable to
Equity holders of 41 677 42 071 112 205
the parent
41 677 42 071 112 205
Calculation of
headline earnings
Profit attributable 41 677 42 071 112 205
to equity holders
of the parent
Loss on sale of 89 412 652
businesses and
property, plant and
equipment
Headline earnings 41 766 42 483 112 857
Basic earnings per 4,27 4,36 11,63
ordinary share
(cents)
Diluted earnings 4,26 4,25 11,36
per ordinary share
(cents)
Headline earnings 4,28 4,40 11,70
per ordinary share
(cents)
Diluted headline 4,27 4,29 11,43
earnings per
ordinary share
(cents)
Weighted average 974 979 964 667 964 667
number of shares
(000`s)
Diluted number of 978 227 991 056 987 670
shares (000`s)
Number of shares in 981 459 964 667 964 667
issue (000`s)
Notes to the condensed consolidated income statement
1 Reporting entity
These condensed GIJIMA AST GROUP LIMITED financial results for the period ending
31 December 2008 constitute a summary of the Group`s unaudited interim financial
statements. They have been prepared in accordance with International Financial
Reporting Standards (IFRS) IAS 34 Interim Financial Reporting.
They 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 2008.
2 Significant accounting policies
The accounting policies applied by the Group in these condensed consolidated
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 2008.
3 Dividend paid
A cash dividend from income reserves, of 3,5 cents per share was paid to
shareholders on 24 November 2008 in respect of the 2008 financial year. The last
date to trade to qualify for this dividend was 14 November 2008.
Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
(6 months) (6 months) (12 months)
R`000 R`000 R`000
4 Operating profit
The following material
items have been included
in the calculation of
operating profit
Profit on sale of - 5 500 5 500
derivative financial
instrument and investment
Exchange rate (32 127) 6 730 47 811
(losses)/gains on
translation
Loss on sale of businesses (89) (412) (652)
and property, plant and
equipment
(32 216) 11 818 52 659
5 Income tax expense
Normal income tax 20 443 17 527 44 456
Provision for abnormal tax 5 233 - -
Withholding tax - - 1 640
Secondary Tax on Companies 3 373 414 414
29 049 17 941 46 510
6 Diluted number of shares
The dilutive impact on the number of shares in issue at 31 December 2008
comprises the potential number of new shares to be issued by the Group to settle
its estimated future liabilities under the GijimaAst Share Linked Bonus Scheme.
In accordance with the rules of the scheme the Group also has the option to
purchase shares on the open market, in which case there will be no dilution.
7 Contingent liabilities
At 31 December 2008 the Group had contingent liabilities in respect of
registered performance bonds, bank lease and other guarantees to the value of
R32,5 million (June 2008: R3,2 million).
Condensed consolidated cash flow statement
for the period ended 31 December 2008
Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
(6 months) (6 months) (12 months)
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from 93 840 49 223 167 304
operations before working
capital changes
Working capital changes 64 530 (56 364) (92 297)
Net financial expense (8 791) (8 240) (12 820)
Dividend paid (34 351) (14 470) (14 470)
Tax paid (11 415) (2 630) (4 364)
Net cash generated 103 813 (32 481) 43 353
from/(used in) operating
activities
Cash flows from investing
activities
Purchase of software to (85) (1 166) (16 734)
maintain operations
Purchase of property, (37 489) (5 238) (23 227)
plant and equipment to
maintain operations
Net cash used in (37 574) (6 404) (39 961)
investing activities
Cash flows from financing
activities
Repayment of long-term (1 387) (1 324) (2 656)
borrowings
Share issue expenses (26) - -
Proceeds from long-term 100 000 - -
borrowings
Net cash generated 98 587 (1 324) (2 656)
from/(used in) financing
activities
Net increase/(decrease) 164 826 (40 209) 736
in cash and cash
equivalents
Cash and cash equivalents 171 182 170 446 170 446
at the beginning of the
period
Cash and cash equivalents 336 008 130 237 171 182
at the end of the period
Condensed consolidated balance sheet
as at 31 December 2008
Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
(6 months) (6 months) (12 months)
R`000 R`000 R`000
ASSETS
Non-current assets 296 711 293 475 284 553
Property, plant and 84 346 54 030 58 829
equipment
Intangible assets 117 982 111 018 122 331
Deferred tax assets 94 383 128 427 103 393
Current assets 956 241 793 837 893 607
Inventories 74 641 45 505 43 650
Trade and other 541 397 612 448 674 633
receivables
Current tax assets 2 659 4 790 1 870
Cash and cash equivalents 337 544 131 094 173 454
Total assets 1 252 952 1 087 312 1 178 160
EQUITY AND LIABILITIES
Equity attributable to 351 927 283 154 319 533
equity holders of the
parent
Non-current liabilities 403 890 304 663 297 507
Interest-bearing 359 080 261 800 260 467
borrowings
Operating lease liability 23 154 23 120 22 725
Deferred tax liabilities 21 656 19 743 14 315
Current liabilities 497 135 499 495 561 120
Trade and other payables 466 147 477 480 502 553
Provisions 22 464 20 551 51 378
Bank overdrafts 1 536 857 2 272
Current tax liabilities 6 988 607 4 917
Total equity and 1 252 952 1 087 312 1 178 160
liabilities
Condensed consolidated segmental analysis
for the period ending 31 December 2008
Unaudited Reviewed Audited
31 December 31 December 30 June
2008 2007 2008
(6 months) (6 months) (12 months)
R`000 R`000 R`000
Revenue
Professional Services 769 159 481 942 1 012 018
Managed Services 725 175 711 693 1 502 723
Consolidated revenue 1 494 334 1 193 635 2 514 741
Segment results
Professional Services 64 542 27 406 65 835
Managed Services 58 609 39 518 76 450
Corporate and other (10 862) (5 402) (18 826)
Exchange rate (32 127) 6 730 47 811
(losses)/gains on
translation
Consolidated operating 80 162 68 252 171 270
profit
Condensed consolidated statement of changes in equity
for the period ended 31 December 2008
Distribut-
Share Share able
R`000 capital premium reserves
Group
Balance at 1 July 2007 964 646 525 (332 053)
Currency translation -
differences
Total income and expense -
recognised directly in equity
Profit for the period 42 070
Share-based payment (267)
transactions
Dividend paid (14 470)
Balance at 31 December 2007 964 646 525 (304 720)
Currency translation -
differences
Total income and expense -
recognised directly in equity
Profit for the period 70 135
Share-based payment 1 276
transactions
Balance at 30 June 2008 964 646 525 (233 309)
Currency translation
differences
Total income and expense -
recognised directly in equity
Profit for the period 41 677
Share issue 17 13 515 (13 532)
Share issue expenses (26)
Dividend paid (34 351)
Balance at 31 December 2008 981 660 014 (239 515)
Non-
distribut-
able Total
R`000 reserves Total equity
Group
Balance at 1 July 2007 (51 282) 264 154 264 154
Currency translation (8 334) (8 334) (8 334)
differences
Total income and expense (8 334) (8 334) (8 334)
recognised directly in equity
Profit for the period - 42 070 42 070
Share-based payment - (267) (267)
transactions
Dividend paid - (14 470) (14 470)
Balance at 31 December 2007 (59 616) 283 153 283 153
Currency translation (35 031) (35 031) (35 031)
differences
Total income and expense (35 031) (35 031) (35 031)
recognised directly in equity
Profit for the period - 70 135 70 135
Share-based payment - 1 276 1 276
transactions
Balance at 30 June 2008 (94 647) 319 533 319 533
Currency translation 25 094 25 094 25 094
differences
Total income and expense 25 094 25 094 25 094
recognised directly in equity
Profit for the period 41 677 41 677
Share issue - -
Share issue expenses (26) (26)
Dividend paid (34 351) (34 351)
Balance at 31 December 2008 (69 553) 351 927 351 927
Directors:
RW Gumede* (Non-executive Chairman)
PJ Bogoshi (Chief Executive Officer)
CJH Ferreira (Chief Financial Officer)
NJ Dlamini*
M Macdonald*
JE Miller*
LBR Mthembu*+
AFB Mthembu*
JCL van der Walt*
*Non-executive
+Appointed 12 August 2008
Company Secretary:
JC Rademan
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Registered Office:
47 Landmarks Avenue, Kosmosdal
Samrand, South Africa
(012) 675 5000
Transfer Secretaries
Link Market Services SA (Pty) Limited
(Registration number 2000/007239/07)
5th floor, 11 Diagonal Street
Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
www.gijima.com
Date: 04/03/2009 07:05:03 Produced by the JSE SENS Department.
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