| Tue 25 Aug 2009, 7:05 | | GIJ - Gijima Ast Group Limited - Audited results for the year ended 30 June 2009 |
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GIJ
GIJ
GIJ - Gijima Ast Group Limited - Audited results for the year ended 30 June 2009
and proposed cash dividend declaration
Gijima Ast Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1998/021790/06
Share code: GIJ
ZAE000064606
("GijimaAst" or "the Group" or "the company")
Audited results for the year ended 30 June 2009 and proposed cash dividend
declaration
Highlights
Revenue up 20% to R3,0 billion
EBITDA (before exchange rate gains and losses) up 82% to R283 million
EBITDA margin (before exchange rate gains and losses) up to 9,4% from 6,2%
Net cash balances up by 183% to R484 million
Consolidated income statement
for the year ended 30 June 2009
Audited Audited
30 June 30 June
2009 2008
Notes R`000 R`000
Revenue 3 014 340 2 514 741
Other operating income 1 241 12 500
Income 3 015 581 2 527 241
Earnings before interest, tax, 283 253 156 007
depreciation, amortisation charges,
and before exchange rate
(losses)/gains on translation
Exchange rate (losses)/gains on (50 653) 47 811
translation
Earnings before interest, tax, 232 600 203 818
depreciation and amortisation
charges (EBITDA)
Depreciation and amortisation (36 151) (32 548)
charges
Operating profit 4 196 449 171 270
Financial income 14 005 14 354
Financial expenses (35 513) (26 909)
Net financial expense (21 508) (12 555)
Profit before tax 174 941 158 715
Income tax expense 5 (64 163) (46 510)
Profit for the year 110 778 112 205
Attributable to
Equity holders of the parent 110 778 112 205
110 778 112 205
Calculation of headline earnings
Profit attributable to equity 110 778 112 205
holders of the parent
Loss on sale of businesses and 359 652
property, plant and equipment
Headline earnings 111 137 112 857
Basic earnings per ordinary share 11,39 11,63
(cents)
Diluted earnings per ordinary share 11,39 11,36
(cents)
Headline earnings per ordinary 11,42 11,70
share (cents)
Diluted headline earnings per 11,42 11,43
ordinary share (cents)
Weighted average number of shares 972 782 964 667
(000`s)
Diluted number of shares (000`s) 972 782 987 670
Number of shares in issue (000`s) 974 742 964 667
Notes to the consolidated income statement
1 Reporting entity
These preliminary GIJIMA AST GROUP LIMITED financial results for the year ended
30 June 2009 constitute a summary, prepared in accordance with the JSE Listings
Requirements; the South African Companies Act (Act 61 of 1973) as amended; and
the recognition and measurement requirements of International Financial
Reporting Standards and the presentation and disclosure requirements of
International Accounting Standard 34, of the Group`s audited financial
statements.
This preliminary announcement has been audited by the company`s auditors, KPMG
Inc., who have expressed an unmodified audit opinion. The auditor`s report is
available for inspection at the company`s registered office.
2 Significant accounting policies
The accounting policies applied by the Group in these preliminary 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.
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
4 Operating profit
The following material items have been
included in the calculation of operating
profit:
Profit on sale of derivative financial - 5 500
instrument and investment
Exchange rate (losses)/gains on (50 653) 47 811
translation
Loss on sale of businesses and property, (359) (652)
plant and equipment
(51 012) 52 659
5 Income tax expense
Normal tax at standard rate 48 983 44 456
International structure 5 355 -
Provision for abnormal tax 5 233 -
Secondary Tax on Companies 3 373 414
Other permanent differences 1 219 -
Withholding tax - 1 640
64 163 46 510
6 Contingent liabilities
At 30 June 2009 the Group had contingent liabilities in respect of registered
performance bonds, bank lease and other guarantees to the value of R10,0 million
(June 2008: R3,2 million).
Consolidated segmental analysis
for the year ended 30 June 2009
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
Revenue
Professional Services 1 540 222 1 080 968
Managed Services 1 474 118 1 433 773
Consolidated revenue 3 014 340 2 514 741
Segment results
Professional Services 160 978 58 474
Managed Services 111 495 83 811
Corporate and other (25 371) (18 826)
Exchange rate (losses)/gains on (50 653) 47 811
translation
Consolidated operating profit 196 449 171 270
Consolidated balance sheet
as at 30 June 2009
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
ASSETS
Non-current assets 306 045 284 553
Property, plant and equipment 91 976 58 829
Intangible assets 133 664 122 331
Deferred tax assets 80 405 103 393
Current assets 1 216 808 893 607
Inventories 36 581 43 650
Trade and other receivables 691 823 674 633
Current tax assets 2 838 1 870
Cash and cash equivalents 485 566 173 454
Total assets 1 522 853 1 178 160
EQUITY AND LIABILITIES
Equity attributable to equity holders of 427 687 319 533
the parent
Non-current liabilities 311 778 297 507
Interest-bearing borrowings 257 709 260 467
Operating lease liability 25 353 22 725
Deferred tax liabilities 28 716 14 315
Current liabilities 783 388 561 120
Trade and other payables 646 309 502 553
Short-term borrowings 100 000 -
Provisions 14 723 51 378
Bank overdraft 1 175 2 272
Current tax liabilities 21 181 4 917
Total equity and liabilities 1 522 853 1 178 160
Consolidated cash flow statement
for the year ended 30 June 2009
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
Cash flows from operating activities
Cash generated from operations before 234 795 167 304
working capital changes
Working capital changes 127 817 (92 297)
Net financial expense (21 849) (12 820)
Dividend paid (34 351) (14 470)
Tax paid (11 610) (4 364)
Net cash generated from operating 294 802 43 353
activities
Cash flows from investing activities
Purchase of software to maintain (21 227) (16 734)
operations
Purchase of property, plant and equipment (57 582) (23 227)
to maintain operations
Net cash used in investing activities (78 809) (39 961)
Cash flows from financing activities
Repayment of long-term borrowings (2 758) (2 656)
Share issue expenses (26) -
Proceeds from short-term borrowings 100 000 -
Net cash generated from/(used in) 97 216 (2 656)
financing activities
Net increase in cash and cash equivalents 313 209 736
Cash and cash equivalents at the 171 182 170 446
beginning of the year
Cash and cash equivalents at the end of 484 391 171 182
the year
Consolidated statement of changes in equity
for the year ended 30 June 2009
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 year 112 205
Share-based payment 1 009
transactions
Dividend paid (14 470)
Balance at 30 June 2008 964 646 525 (233 309)
Currency translation -
differences
Revaluation of land and
buildings (net of tax)
Total income and expense -
recognised directly in equity
Profit for the year 110 778
Share-based payment 556
transactions
Dividend paid (34 351)
Share issue 17 13 515 (13 532)
Share issue expenses (26)
Own shares acquired (7) (5 405)
Balance at 30 June 2009 974 654 609 (169 858)
Non-
distribut-
able Total
R`000 reserves equity
Group
Balance at 1 July 2007 (51 282) 264 154
Currency translation (43 365) (43 365)
differences
Total income and expense (43 365) (43 365)
recognised directly in equity
Profit for the year 112 205
Share-based payment 1 009
transactions
Dividend paid (14 470)
Balance at 30 June 2008 (94 647) 319 533
Currency translation 34 559 34 559
differences
Revaluation of land and 2 050 2 050
buildings (net of tax)
Total income and expense 36 609 36 609
recognised directly in equity
Profit for the year 110 778
Share-based payment 556
transactions
Dividend paid (34 351)
Share issue -
Share issue expenses (26)
Own shares acquired (5 412)
Balance at 30 June 2009 (58 038) 427 687
OVERVIEW
GijimaAst is a leading South African group which operates in the Information and
Communication Technology (ICT) services sector. Organised in two Strategic
Business Units, namely Managed Services and Professional Services, we offer end
to end ICT infrastructure management services and ICT professional services.
The year under review was a successful period in the execution of the Group
strategy - Vision Possible. The Group`s operating performance delivered solid
results with organic revenue growth of 20% and an 82% growth in earnings before
interest, tax depreciation, amortisation charges, intergroup exchange rate gains
and losses. This represents a normalised EBITDA (before exchange rate gains and
losses on translation) margin of 9,4% against 6,2% in the previous year. The
employee complement increased from 3 657 last year to 3 929 currently. Revenue
per employee increased by 11% and normalised EBITDA per employee increased by
69%.
Early in the financial year, in the face of the looming economic downturn, the
Group took proactive measures to contain costs and preserve cash. These measures
have resulted in the cash position of the Group improving significantly from
R171 million to R484 million.
The economic downturn has had a varying impact on different parts of the
business. The overall impact has not been as severe as in other parts of the
industry due to the nature of the Group`s revenue profile and especially the
Group`s high percentage of long-term services contracts. However, the business
units that have high exposure to the mining sector such as GMSI and those that
have high product sales dependencies like Distributed Computing Services and
Unified Communications have seen revenues negatively impacted by the downturn.
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 DTI`s Broad Based Black Economic Empowerment
scorecard requirements and became the number one listed ICT company in the
country as rated by the Financial Mail and fifth overall out of 200 blue-chip
companies listed on the JSE.
OPERATIONAL REVIEW
Financial Commentary
A strategic review of the business eighteen months ago resulted in a realignment
of the organisational structure and the consolidation of the Group into fewer
operating business units. At the time management was of the view that GijimaAst
needed to provide a more comprehensive value proposition to the market, based on
customers` buying behaviour and emerging technology trends. The year under
review is the first full year of operation with this new structure and the
increased margins confirm the effectiveness of these structural improvements.
Our focus areas during the financial year were to grow our presence in the
public sector and financial service, increase our presence within our major
outsourced clients, grow the higher margin professional services business and
improve efficiencies in managed services by introducing new delivery models. The
strategy is gaining momentum as evidenced by public sector revenue contribution
of 44% (2007/8: 38%) and the Professional Services division increasing revenue
contribution from 43% to 51%. Margins continue to expand in both divisions as a
result of greater economies of scale and better quality business.
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 year ended 30 June 2009 resulted in the inclusion of a
R51 million exchange rate loss for the period, compared to an exchange rate gain
of R48 million reported in the comparative reporting period.
If the impact of exchange rate translation gains and losses are eliminated in
the current and comparative reporting periods, GijimaAst`s normalised earnings
per share for the year ended 30 June 2009 improved by 88% (applying the
statutory tax rate of 28%):
30 June 30 June
2009 2008 Variance
R`000 R`000 %
Reported profit for the year 110 778 112 205 (1)
Add back exchange rate 50 653 (47 811)
losses/(gains) on translation
Tax impact of exchange rate (14 183) 13 387
losses/(gains) on translation
Normalised profit for the year 147 248 77 781 89
Normalised basic earnings per 15,14 8,06 88
ordinary share (cents)
The Group generated significant cash flows during the reporting period. Cash
generation from operations was augmented by improved working capital management.
An additional R100 million was raised on the Group`s debtor securitisation
programme. The Group took the view that it would access additional cash reserves
to see it through the anticipated tightening credit markets recently
experienced. Funding of this R100 million for the first year of the anticipated
five year term was sourced from funds expiring in December 2009. It is
consequently classified on the balance sheet as short-term. The Group will
review its appetite to extend this funding beyond December 2009 considering the
healthy growth of its cash generation from operations. Despite the additional
R100 million of short-term debt, the Group`s current ratio at 1,55 times remains
in line with the 1,59 times achieved last year.
Proposed Dividend Declaration
In view of the good earnings performance and our sound liquidity position the
Board has declared a cash dividend of 5,0 cents per share, up 43% on last year`s
dividend of 3,5 cents per share. The dividend is payable to shareholders
recorded in the books of the company at the close of business on Friday, 27
November 2009. The proposed dividend is to be confirmed at the annual general
meeting to be held on Friday, 13 November 2009. An announcement confirming the
payment of the proposed dividend will be made on SENS on Friday, 13 November
2009 and in the press on Saturday, 14 November 2009.
The salient dates are as follows:
Last date to trade cum dividend Friday, 20 November 2009
Securities start trading ex dividend Monday, 23 November 2009
Record date Friday, 27 November 2009
Payment date Monday, 30 November 2009
The dividend is declared in the currency of the Republic of South Africa.
Share certificates may not be dematerialised or rematerialised between Monday,
23 November 2009 and Friday, 27 November 2009, both dates inclusive.
Innovation and Continuous Improvement
In order to sustain its competitive advantage, an organisation must remain close
to its customers, continuously innovate and evolve. In the last eighteen months
we invested in the implementation of world-class service management models and
the upgrade of our information technology infrastructure.
We invested an additional R4 million in the rollout of the ITIL (Information
Technology Infrastructure Library) framework. ITIL is a globally accepted best
practice framework for service management and its implementation will provide
the organisation with consistent and repeatable processes for service
improvement to clients. We also invested R19 million in the implementation of
our SAP ERP system.
Our People
Our employees are our greatest assets! This may sound cliched - but for an ICT
services company like us, this statement cannot be more appropriate. We employ
over 3 900 people, 50% of whom are permanently placed at clients` premises.
Almost 80% of our staff are billable. Staff related expenditure amounts to half
of our total annual expenditure (excluding forex losses, interest and tax). Our
performance and our competitiveness depend on the quality of our people.
Our focus in the last eighteen months was to develop high performance leadership
within GijimaAst. We believe that only an empowered, high performing leadership
can create an environment that unleashes the energy of people to create and
contribute. During the period under review we trebled our training spend from
0,6% of payroll (2007) to 2%. We believe that investment in our people is the
key to sustaining our competitiveness. The employee annual turnover has
decreased from 21% in 2007 to 10% currently.
PROSPECTS
Globally the ICT industry has experienced a dramatic slowdown in line with the
economic recession. Worldwide IT spend is expected to contract by some 2% in
constant currency during 2009. Whilst a recovery is expected, macroeconomic
risks are clouding the timing and assumptions of this recovery. The South
African ICT industry is not insulated from this trend and therefore experiencing
a slowdown - albeit not as severe. The current forecast is that the growth of
the industry will be at best flat. The public sector IT expenditure continues to
grow ahead of the general market. Requirements for service delivery improvement
have given rise to a large number of system integration and outsource projects
in this sector.
The industry is also experiencing increased competition driven primarily by
technological convergence. Increasingly mobile and fixed line operators are
creating capabilities to provide data services to their voice clients. This has
put them on a collision course with traditional IT services providers. The key
determinant for competitive advantage will remain customer intimacy and
partnership.
The pendulum is swinging towards outsource as many companies judiciously
evaluate what constitute core and `context` services. A number of these
outsource opportunities are second and third generation projects and emphasis is
put on business returns. Service model flexibility and strategic partnership are
as important as cost reduction in determining the outsource partner.
GijimaAst is favourably positioned to take advantage of these market conditions.
Our experience in the public sector and other focus industries, combined with
our track record and expertise in outsource services provides us a unique
competitive advantage.
RW Gumede PJ Bogoshi CJH Ferreira
Non-executive Chief Executive Chief Financial
Chairman Officer Officer
25 August 2009
Directors:
RW Gumede* (Non-executive Chairman)
PJ Bogoshi (Chief Executive Officer)
CJH Ferreira (Chief Financial Officer)
NJ Dlamini*
M Macdonald*
JE Miller*
AFB Mthembu*
LBR 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)
For more information please visit www.gijima.com
Date: 25/08/2009 07:05:02 Produced by the JSE SENS Department.
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