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GijimaAst - Summarised audited results for the year ended 30 June 2005
Gijima AST Group Limited
(`GijimaAst` or `the Group`)
(Incorporated in the Republic of South Africa)
(Registration number 1998/021790/06)
Share code: GIJ
ISIN: ZAE000064606
SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2005
CHIEF EXECUTIVE OFFICER`S REPORT
INTRODUCTION
We planned to stabilise the company during the financial year ending 30 June
2005 and to prepare it for the future. To this end we succeeded in resolving the
dispute with the South African Revenue Services (`SARS`) over the trademarks and
raised R160 million by means of a rights offer, which was 51,8% oversubscribed.
The rights offer strengthened our balance sheet and working capital, enabling us
to conclude our empowerment transaction with Gijima Info Technologies
(`Gijima`). GijimaAst, the result of the merger between the listed AST Group and
Gijima Info Technologies in April 2005, is a company with excellent credentials:
- A large, competent and extensive delivery capacity and capability which is
engaged by an extensive and loyal customer base - all our key clients have
been with us for longer than three years.
- A reputation as a company with an enviable service track record.
- A leading set of industry solutions that support our key clients in
financial services, retail, mining, manufacturing, government and
telecommunications.
- An increased geographic footprint now with more than 70 service centres
across South Africa, which, we believe, is unparalleled in the market.
- A workforce of more than 3 000 people consisting of many of the most sought
after staff and skills in the industry.
- A 32% black-owned company, with a board of directors that is 43% black,
supported by company-wide transformation initiatives, which are already
aligned with the proposed Information and Communication Technology (`ICT`)
Charter.
GijimaAst is structured - financially, technologically and strategically - to
deliver value to our clients, staff, shareholders and our communities.
MARKET CONDITIONS
Market conditions have not changed significantly in the last six months and
trading conditions continue to be challenging. Whilst the anticipated
improvement in demand is materialising in some sectors, others continue to lag.
The demand for resourcing skills has again increased and this is an early
indicator of better markets ahead. Large companies are also starting to replace
the hardware infrastructure acquired in anticipation of Y2K (year 2000) at the
end of 1999 which provides further evidence of increasing demand in the sector.
The client environment is still characterised by the need for cost reduction in
increasingly competitive markets. Clients are seeking differentiators - and
technology often provides the vehicle. As a result, service providers are
required to propose more cost-effective innovative solutions than ever before.
OPERATIONAL UPDATE
We completed the Business Improvement Programme in December 2004, and the
benefits and cost savings exceeded our initial targets. The merger with Gijima
has introduced further opportunities for internal consolidation and efficiency
enhancement.
In the current services marketplace, which is becoming increasingly
commoditised, we have maintained our competitive advantages with high quality
service delivery, cost-effective solutions and specialist industry knowledge:
- We have identified opportunities to extend economies of scale in our
infrastructure businesses by integrating the activities of the merged
companies. We are also in the process of evaluating enhancements that will
accrue from the introduction of new tools for remote management, problem
solving, logistics and inventory as well as training our human resources to
be multi-skilled.
- Our focus on understanding our clients` industry segments through our
Industry Solutions continues to be a tangible differentiator. We are seeing
the strongest demand in the financial services and retail environments,
with rapid technological convergence between the sectors. Demand for large
implementations in mining and manufacturing is still dampened by Rand
strength and economic activity. Our positioning in the public sector
continues to be a high priority and, as a black economic empowerment
(`BEE`) company, we are now making better inroads into the sector. As an
approved and accredited service provider for State Information Technology
Agency (`SITA`) on the Seat Management Services, Tender 285, and an
accredited services provider on SITA Tender 348, we are well positioned to
participate in government spend.
Our Networks business performed satisfactorily and its product and service
offerings continue to be suited to the current environment. Although revenues
were lower than anticipated, profitability was in line with expectations as the
division placed a higher focus on services. Networks made inroads into the
market with its data products. During the year, both Mittal SA and Kumba
Resources renewed their managed services agreements and Voice Over Internet
Protocol (VOIP) solutions were sold to large corporates and the public sector.
Our Virtual Private Network offering, which was launched in February 2005, is
showing real potential for growth.
The AST Distributed Technology Services (`DTS`) results were also in line with
our expectations despite revenue pressure resulting from lower product sales.
The division`s focus on quality service delivery paid off. This is demonstrated
by the achievement of an average of 97,5% of the more than 1300 service level
agreements we manage. This focus on service excellence has resulted in stronger
client relationships.
Our Solutions business underperformed significantly despite stringent cost
containment. Strategies and new management have been put in place to address the
problems encountered. Resource Solutions was the star performer of the division
as a result of the increased demand for resources. Our mining software unit
GMSI`s results were also in line with expectations, despite the impact of the
strong Rand. This demonstrates the quality of our mining product and services
offering. During the year, large opportunities were eroded by clients who were
under pressure to contain their own costs and risk which resulted in us being
awarded smaller contracts.
We successfully protected our client base during the year under review although
pressure to reduce spend is ongoing from key clients. Notable deals have been
rare, but we have been awarded a number of smaller engagements. We see
opportunities to grow these into significant engagements.
GOVERNANCE
Our commitment to the Code of Corporate Practice and Conduct as recommended by
King II is steadfast and during the year we delivered on our intention to
introduce a balanced and strategically strong board of directors. We now have 14
board members, six of whom are black and four are executive directors. We
welcome as Executive Directors Robert Gumede as Executive Deputy Chairman and
Carlos Ferreira as Financial Director from Gijima. They were both instrumental
in concluding the merger. We also welcome our new independent non-executive
directors Nhlanhla Mhlongo, Judy Dlamini, Andrew Mthembu, Kalaa Mpinga and
Cheslyn Mostert. The diverse experience and leadership offered by all our
directors will stand us in good stead for the future and we are already seeing
the benefits from the new board level leadership.
BROAD-BASED TRANSFORMATION
We have made significant progress with all the elements of transformation, which
positions us to meet the requirements of the ICT Charter when it is finalised.
The BEE transaction which led to the formation of GijimaAst resulted in a 32%
black ownership. The transaction was based on the independently assessed
underlying value of Gijima`s IT subsidiaries and AST Group. It was a unique BEE
transaction in the ICT sector in that it entailed no funding structures,
preferential shares or special voting rights. Gijima`s holding in GijimaAst is
unencumbered.
Our stated intent has been to transform our board of directors to a 40% black
representation by the end of this calendar year. We exceeded this target with
the recent appointments, and 43%, (six out of 14) of our board members as at the
end of June 2005 are from previously disadvantaged backgrounds.
Our employment equity statistics have improved and are in line with our plan
submitted to the Department of Labour. In addition, the demographics of our top
management are now more representative, having achieved our target of 25% by
year-end.
Our firm commitment to transformation ensures that we will continue to make
changes internally and in partnership with our clients, suppliers and the
communities that we serve.
DIVIDEND POLICY
There will be no dividend payments for the 2005 financial year. This will be
reviewed in future in the light of operating performance and the capital
requirements of the business.
PROSPECTS
Our restructuring has given us the flexibility to reposition ourselves as the
market evolves. We believe that we are very well positioned in our chosen
markets - we have strong partnerships with suppliers, our human capital is
powerful and well trained, our services and products are well priced and our
client relationships robust.
Our growth will be driven through our sales initiatives. We have the cost-
effective solutions to continue delivering effective solutions to our
infrastructure clients. We will focus heavily on increasing market share in the
solutions environment supported by our specialised industry knowledge.
During the 2006 financial year, we will focus on leveraging the benefits of the
recent merger. We will continue integrating the operations of Gijima and AST and
further strengthen our sales capability. By maintaining the efficiency gains and
increasing market share, we will deliver value to stakeholders.
ACKNOWLEDGEMENTS
I wish to thank all our stakeholders for the value which they added during the
turnaround project and merger with Gijima. In particular, I wish to thank:
- Our shareholders whose confidence in the future of our organisation was
reflected in their support of the rights offer;
- Our advisors and funders without whose support we would not have been able
to achieve our successful restructuring;
- My fellow directors, for their time, contribution and commitment;
Our clients who continued to support AST throughout the turnaround phase;
and
- Our employees who put in the extra effort to ensure that we now have the
ability to deliver on our vision for the future.
We have created a well positioned company based on a solid foundation and have
every reason to look forward to the exciting future of GijimaAst.
John E Miller
CE0
Income Statement for the year ended 30 June 2005
Audited Audited
30 June 30 June
2005 2004
(12 months) (12 months)
Notes R`000 R`000
Revenue 1 587 302 1 734 652
Cost of sales (1 298 611) (1 452 740)
Gross profit 288 691 281 912
Other operating income 1 620 626
Administrative and other (249 065) (367 460)
expenses
Operating profit/(loss) 2 41 246 (84 922)
Net finance cost 3 (4 500) (40 668)
Share of results of 136 326
associates
Profit/(loss) before tax 36 882 (125 264)
Income tax expense (86 196) (8 714)
Loss from ordinary (49 314) (133 978)
activities
Minority interest (15 520) (7 679)
Net loss for the year (64 834) (141 657)
Calculation of headline
earnings
Net loss for the year (64 834) (141 657)
Impairment/amortisation of 32 742 96 633
goodwill
Impairment of assets and 86 416 27 422
investments
(Profit)/loss on sale of (4 891) 3 584
businesses and properties
Headline earnings/(loss) 49 433 (14 018)
Headline earnings/(loss) 15,66 (9,15)
per ordinary share (cent)
Fully diluted headline 15,66 (9,15)
earnings/(loss) per
ordinary share (cent)
Basic loss per ordinary (20,54) (92,51)
share (cent)
Fully diluted basic loss (20,54) (92,51)
per ordinary share (cent)
Weighted average number of 315 638 153 124
shares (000`s)
Fully diluted number of 315 638 164 849
shares (000`s)
Number of shares in issue 964 667 184 291
(000`s)
Notes to the Income Statement
1. Basis of preparation
These condensed financial statements are prepared in accordance with South
African Statements of Generally Accepted Accounting Practice (GAAP). The
accounting policies used in the preparation of these condensed financial
statements are consistent with those used in the annual financial statements for
the year ended 30 June 2004, with the exception of the following:
- Adoption of International Financial Reporting Standard (`IFRS`) 3 in
relation to business combinations and treatment of intangibles
- The amendments to IAS 36 (AC 128) Impairment of Assets and IAS 38 (AC 129)
Intangible Assets have been applied in the current year.
In line with the guidance set out in South African Institute of Chartered
Accountants (`SAICA`) Circular 7/2005, issued in August 2005, the basis of
recognition of operating leases has been changed to comply with AC 105.
Furthermore, a previously unrecognised derivative financial instrument has been
recognised in the financial year. In terms of AC 103, these matters are
reflected as fundamental errors and comparative information has been restated.
Impact on
Impact Impact on years
on prior
2005 2004 to 2004
R`000 R`000 R`000
Recognition of operating (3 223) (4 180) (12 399)
lease payments on a
straight line basis as
opposed to when incurred
Taxation 935 1 212 3 596
(2 288) (2 968) (8 803)
Recognition of previously 1 413 2 899 4 741
unrecognised derivative
financial instrument
Taxation (410) (841) (1 375)
1 003 2 058 3 366
Audited Audited
2. Operating profit/(loss) 30 June 30 June
2005 2004
The following items of unusual nature
have been charged to the operating
profit/(loss):
(Profit)/loss on sale of businesses (4 891) 3 584
and properties
Impairment of assets and investments 3 340 27 422
Amortisation of intangible assets 1 568 5 272
Impairment/amortisation of goodwill 32 742 96 633
32 759 132 911
3. Finance costs
Interest received 16 805 18 054
Reversal of excess provision 17 698 -
Fair value adjustment (2 090) 2 899
Finance costs (36 913) (61 621)
Net finance cost (4 500) (40 668)
Balance Sheet as at 30 June 2005
Audited Audited
30 June 30 June
2005 2004
R`000 R`000
ASSETS
Non-current assets 336 852 379 638
Property, plant and equipment 55 739 98 611
Intangible assets 105 862 36 742
Investments 13 149 17 974
Deferred tax asset 162 102 226 311
Current assets 553 866 404 877
Inventories 49 210 37 037
Trade debtors and other receivables 393 645 283 312
Current tax asset 12 949 -
Cash and cash equivalents 98 062 84 528
Total assets 890 718 784 515
EQUITY AND LIABILITIES
Capital and reserves 243 258 23 001
Minority interest 25 599 14 579
Non-current liabilities 123 803 291 932
Interest-bearing borrowings 70 347 231 740
Operating lease liability (see note 1) 19 801 16 579
Deferred tax liability 33 655 43 613
Current liabilities 498 058 455 003
Trade creditors and accruals 218 502 188 845
Provisions 80 634 71 191
Income received in advance 41 113 46 424
Short-term portion of interest-bearing 36 161 49 006
borrowings
Sundry payables (including payroll 62 346 50 288
vendors and VAT)
Bank overdrafts 41 221 46 234
Amounts due to vendors - 175
Current tax liability 18 081 2 840
Total equity and liabilities 890 718 784 515
Net asset value per ordinary share 25,22 12,48
(cents)
Cash Flow Statement for the year ended 30 June 2005
Audited Audited
30 June 30 June
2005 2004
(12 months) (12 months)
R`000 R`000
Cash flows from operating
activities
Cash generated from operations 108 116 31 758
before working capital changes
Working capital changes (49 881) 51 624
Net finance cost (24 608) (43 567)
Normal tax paid (30 988) (3 400)
Cash generated from/(used by) 2 639 36 415
operating activities
Cash flows from investment
activities
Vendor payments for past (380) (10 091)
acquisitions
Cash obtained from acquisition 2 823 -
Acquisition expenses (3 425) -
Proceeds from the disposal of - 24 298
businesses
Other investment activities 4 676 (1 924)
Cash generated from/(used in) 3 694 12 283
investment activities
Cash flows from financing
activities
Proceeds from the rights issue 160 000 88 750
Share issue expenses (3 731) -
Net repayment of long-term (144 055) (135 287)
borrowings
Cash from (utilised in) financing 12 214 (46 537)
activities
Net increase in cash and cash 18 547 2 161
equivalents
Cash and cash equivalents at the 38 294 36 133
beginning of the year
Cash and cash equivalents at the 56 841 38 294
end of the year
Statement of Changes in Equity for the year ended 30 June 2005
Audited Audited
30 June 30 June
2005 2004
(12 months) (12 months)
R`000 R`000
Share capital 964 184
Balance at the beginning of the 184 67
year
New shares issued during the year 780 117
Share premium 646 525 343 457
Balance at the beginning of the 343 457 236 209
year
Discount at acquisition (IFRS 3) 30 876 -
Premium on new shares issued 275 923 113 545
during the year
Share issue expenses written off (3 731) (6 425)
during the year
Utilisation of treasury shares - 128
during the year
Vendor claims - 8 207
Balance at the beginning of the 8 207 30 206
year
Changes in amounts due to vendors (8 207) (21 999)
during the year
Distributable reserves (374 904) (282 230)
Balance at the beginning of the (275 883) (135 136)
year, as previously stated
Prior year adjustment - operating (11 771) (8 803)
lease (see note 1)
Prior year adjustment - 5 424 3 366
recognition of previously
unrecognised derivative financial
instrument (see note 1)
Balance at the beginning of the (282 230) (140 573)
year, restated
Net loss for the year (64 834) (141 657)
Transfer to non-distributable (27 840) -
reserves
Non-distributable reserves (29 327) (46 617)
Balance at the beginning of the (46 617) (7 115)
year
Transfer from distributable 27 840 -
reserves
Currency translation differences (10 550) (39 502)
for the year
Balance at the end of the year 243 258 23 001
FINANCIAL REVIEW
The reported results include the results of the businesses acquired from Gijima
for the two months of May and June 2005.
In order to provide a comparable base against which to measure performance, the
income statement for the past year presented on the opposite page contains an
unaudited normalised view of the results had the Gijima businesses been included
for the full twelve month period, eliminating the impact of non-recurring and
unusual items from the results and assuming the increased number of shares in
issue at 30 June 2005 had been in issue for the full financial year.
REVENUE
Market conditions remained challenging during the year which resulted in a 6,2%
reduction in reported revenue, excluding the R42,7 million revenue contribution
of non-core businesses disposed of during 2004, but including the contribution
of the acquired Gijima businesses for May and June 2005.
CHANGE OF ACCOUNTING TREATMENT FOR LEASES
The SAICA released circular number 7/2005 in August 2005 which advised South
African companies on the accounting treatment of operating leases in terms of
the provisions of AC 105. In the past, as was generally the practice in South
Africa, operating lease expenses were charged to the income statement when
incurred. AC 105 requires accounting for operating lease payments, which include
fixed rental increases, on a straight line basis over the period of the lease
agreements.
This negatively impacted the Group`s operating profit by R3,2 million in the
current year, R4,2 million in the previous year and R12,4 million in prior
years. The graph below depicts the negative impact on the Group`s profitability
into the 2007 financial year where after it has a positive profit impact. The
net impact over the duration of the lease periods is nil. Comparative figures
have been adjusted and it has been recognised as a fundamental error in
accordance with AC 103.
GRAPH
IMPACT OF CHANGE IN OPERATING LEASE TREATMENT
2001 -2
2002 -6
2003 -5
2004 -4
2005 -3
2006 -2
2007 -1
2008 0
2009 2
2010 3
2011 5
2012 7
2013 6
EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (`EBITDA`) MARGIN
The reported EBITDA margin improved from 5,8% in 2004 to 7,4% in 2005. We
successfully contained our cost base and increased margins despite continued
pressure from clients to reduce their costs.
IMPAIRMENT OF ASSETS AND INVESTMENTS
Impairment of a deferred tax asset of R83,1 million following a Deed of
Settlement concluded with SARS in September 2004 to resolve historic
uncertainties regarding trade mark deductions, has been included in the income
tax expense. This amount was included in operating expenses in the interim
financial results.
The impairment charge against assets and investments comprises the following non
recurring items:
- impairment of a R2,6 million derivative financial instrument resulting from
the sale of properties and the consequential collapse of the related
finance structure; and
- an impairment charge of R0,8 million relating to the de-commissioning of
mainframe equipment.
PROFIT ON SALE OF PROPERTIES
A surplus of R4,6 million was realised on properties sold during the group`s
restructuring programme.
NORMALISED INCOME STATEMENT
Reported Adjustments
30 June 30 June
2005 2005
(12 months) (12 months)
R`000 Notes R`000
Revenue 1 587 302 1 264 051
EBITDA 116 851 1 34 123
EBITDA margin 7,4%
Depreciation (42 846) 1 (6 296)
EBITA 74 005 1 27 827
Impairment of assets and (3 340) 2 3 340
investments
Profit/(loss) on sale of 4 891 3 (4 891)
businesses and properties
Operating profit from 75 556 26 276
operations before
amortisation
Amortisation of intangible (1 568) -
assets
Impairment/amortisation of (32 742) 4 32 742
goodwill
Operating profit/(loss) 41 246 59 018
Net finance cost (4 500) 5 (1 608)
Share of results of 136 -
associates
Profit/(loss) before tax 36 882 57 410
Income tax expense (86 196) 2 72 790
Profit/(loss) from (49 314) 130 200
ordinary activities
Minority interest (15 520) -
Net profit/(loss) for the (64 834) 130 200
year
Calculation of headline
earnings (R`000)
Net profit/(loss) loss for (64 834) 130 200
the year
Impairment/amortisation of 32 742 (32 742)
goodwill
Loss on impairment of 86 416 (86 416)
assets and investments
(Profit)/loss on sale of (4 891) 4 891
businesses and properties
Headline earnings/(loss) 49 433 15 933
Headline earnings/(loss) 15,66
per ordinary share (cent)
Fully diluted headline 15,66
earnings/(loss) per
ordinary share (cent)
Basic earnings/(loss) per (20,54)
ordinary share (cent)
Fully diluted basic (20,54)
earnings/(loss) per
ordinary share (cent)
Weighted average number of 315 638
shares (000`s)
Fully diluted number of 315 638
shares (000`s)
Number of shares in issue 964 667
(000`s)
Normalised Reported*
30 June 30 June
2005 2004
(12 months) (12 months)
R`000 R`000
Revenue 1 851 353 1 734 652
EBITDA 150 974 101 110
EBITDA margin 8,1% 5,8%
Depreciation (49 142) (53 121)
EBITA 101 832 47 989
Impairment of assets and - (27 422)
investments
Profit/(loss) on sale of - (3 584)
businesses and properties
Operating profit/(loss) 101 832 16 983
from operations before
amortisation
Amortisation of intangible (1 568) (5 272)
assets
Impairment/amortisation of - (96 633)
goodwill
Operating profit/(loss) 100 264 (84 922)
Net finance cost (6 108) (40 668)
Share of results of 136 326
associates
Profit/(loss) before tax 94 292 (125 264)
Income tax expense (13 406) (8 714)
Profit/(loss) from 80 886 (133 978)
ordinary activities
Minority interest (15 520) (7 679)
Net profit/(loss) for the 65 366 (141 657)
year
Calculation of headline
earnings (R`000)
Net profit/(loss) loss for 65 366 (141 657)
the year
Impairment/amortisation of - 96 633
goodwill
Loss on impairment of - 27 422
assets and investments
(Profit)/loss on sale of - 3 584
businesses and properties
Headline earnings/(loss) 65 366 (14 018)
Headline earnings/(loss) 6,78 (9,15)
per ordinary share (cent)
Fully diluted headline 6,78 (9,15)
earnings/(loss) per
ordinary share (cent)
Basic earnings/(loss) per 6,78 (92,51)
ordinary share (cent)
Fully diluted basic 6,78 (92,51)
earnings/(loss) per
ordinary share (cent)
Weighted average number of 153 124
shares (000`s)
Fully diluted number of 164 849
shares (000`s)
Number of shares in issue 964 667 184 291
(000`s)
Notes explaining adjustments
1. Results of Gijima for the 10 months ended 30 April 2005 that are not
included in the reported numbers.
2. Impairment of deferred tax asset of R83,1 million following agreement with
SARS, impairment of finance asset of R2,6 million linked to property
disposed of, and impairment of mainframe equipment of R0,8 million
decommissioned
3. Accounting profit on sale of properties.
4. Impairment of historic goodwill
5. Net finance cost (4 500) (1 608) (6 108) (40 668)
Interest received 16 805 - 16 805 18 054
Reversal of excess 17 698 (17 698) - -
provision
Fair value (2 090) 2 090 - 2 899
adjustment
Finance costs (36 913) 14 000 (22 913) (61 621)
* Restated to reflect the change in basis of preparation.
INTANGIBLE ASSETS ACQUIRED
In terms of IFRS 3, the difference between the fair value of the ordinary shares
issued for the acquisition of the Gijima businesses and the tangible asset value
was allocated to specifically valued intangible assets, with the balance
classified as goodwill as summarised below:
Discount
on Deferred
acquisi- tax Final
R million Value tion impact value
Client contracts 7,4 - - 7,4
Goodwill (Trade name) 46,7 - - 46,7
Goodwill 16,3 30,9 2,1 49,3
Total 70,4 30,9 2,1 103,4
Impair-
Amortisa- ment
Subject tion required
to charge at
amortisa- June 30 June
R million tion 2005 2005
Client contracts Yes 1,6 No
Goodwill (Trade name) No - No
Goodwill No - No
Total 1,6
The value of the shares issued in consideration for the fair value of the Gijima
businesses` net assets have been adjusted to the closing market price on the
transaction date of 45 cents per share. The merger and the rights issue were
concluded at a share price of 35 cents per share.
The deferred tax liability that arose as a result of the fair value calculated
for client contracts has, in accordance with IFRS 3, been reflected against the
goodwill balance.
Client contracts comprise contractually secured agreements as at the merger date
and ignore the likelihood of renewals. Amortisation is spread over the contract
periods at the date of the merger. Client contracts were valued using a
discounted cash flow valuation of the revenue and costs associated with each
contract.
The indicative trade name valuation was calculated based on the relief-from-
royalty methodology. In accordance with the provisional application requirements
of IFRS 3 the finalisation of the value and the useful life of the trademark
will be completed within the specified 12 month period.
IMPAIRMENT OF GOODWILL
In accordance with IFRS 3 the Group ceased amortisation of historical goodwill
from 1 July 2004. The impairment charge of R32,7 million relates to historic
goodwill of which R4,0 million remains on the balance sheet.
FINANCE COSTS
Finance costs continued to decrease in line with the significantly lower
interest bearing debt and lower market interest rates. An excess provision for
interest of R17,7 million was reversed following the resolution of historic
uncertainties with SARS. Fair value adjustments to financing agreements in
support of group properties disposed of, coupled with the valuation of a
financial derivative instrument resulting from a forward purchase of shares,
resulted in a net charge of R2,1 million. The latter valuation impacted the
Group`s finance cost positively by R1,4 million in the current year, R2,9
million in the previous year and R4,7 million in prior years. In accordance with
the provisions of AC 103 this positive impact has been recognised as a
fundamental error.
HEADLINE EARNINGS
Reported headline earnings of R49,4 million (15,66 cents per share) represent a
substantial improvement from the previous year`s headline loss of R14,0 million
((9,15) cents per share).
The normalised headline earnings of R65,4 million includes:
- the Gijima businesses for the full year;
- the full year benefit of the interest saving resulting from the funds raised
from the rights issue; and
- excludes abnormal items.
This results in a more meaningful comparison, as does the normalised 6,78 cents
headline earnings per share based on the increased issued share capital after
the merger and rights issue.
BALANCE SHEET
The balance sheet was satisfactorily restructured during the year following the
completion of the rights offer and the Gijima acquisition on 3 May 2005. The
rights issue was 51,8% over-subscribed and raised R160,0 million through the
issue of 457,1 million shares. The businesses of Gijima were integrated and
their combined fair value of R108,1 million was settled through the issue of
308,8 million ordinary shares. 14,5 million shares were issued to settle the
remaining vendor claims during the year. The number of shares in issue increased
from 184,3 million to 964,7 million following these transactions. The debt-
equity ratio has improved from 14,2 times at 30 June 2004 to 0,61 times at 30
June 2005.
Interest bearing debt decreased by R179,3 million during the financial year
under review, of which R116,8 million was the direct result of the rights issue
in May 2005.
The Group`s current ratio improved from 0,89 in 2004 to 1,11 in 2005.
Net cash on hand improved from R38,3 million at 30 June 2004 to R56,8 million at
30 June 2005. Cash generation would have improved with a further R58,0 million
had the net cash receivable at year end on a single transaction, which was
received in July 2005, been received before the year end. Included in cash and
cash equivalents is cash (R84,7 million) of DTS of which the Group has a 70%
shareholding. The utilisation of this cash is regulated by a shareholders
agreement.
CONTINGENT LIABILITIES
At 30 June 2005 the Group had contingent liabilities in respect of registered
performance bonds, bank, lease and other guarantees to the value of R2,7 million
(June 2004: R2,5 million).
CAPITAL EXPENDITURE
The capital expenditure for GijimaAst during the period under review was R32,8
million, primarily in respect of purchases of income generating computer
equipment. Commitments at 30 June 2005 to incur future expenditure amounted to
R1,8 million.
POST-BALANCE SHEET EVENTS
No significant events occurred after the balance sheet date.
AUDIT OPINION
PricewaterhouseCoopers Inc. audited the summarised announcement of the annual
results contained herein, as well as the comprehensive financial statements from
which the summarised results were derived. The unqualified audit reports on the
comprehensive financial statements and the summarised financial results are
available for inspection at GijimaAst`s registered office.
HJ Smith* (Chairman), RW Gumede (Deputy Chairman), JE Miller (Chief Executive
Officer), NJ Dlamini*, W Drue*, MG Erasmus, CJH Ferreira (Financial Director), M
Macdonald*, NI Mhlongo*, CME Mostert*, K Mpinga* (Democratic Republic of the
Congo), AFB Mthembu*, CJ Potgieter*, JCL van der Walt*, * Non-executive
This and additional information is available on our website: www.gijima.com
Registered office:
47 Landmarks Avenue,
Kosmosdal, Samrand,
South Africa,
(012) 675 5000
Transfer secretaries:
Ultra Registrars (Pty) Limited
(Registration number 2000/007239/07),
Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Date: 30/08/2005 07:05:22 AM
Produced by the JSE SENS Department
