Asha Speckman
GIJIMA may report another loss this year after saying yesterday that it expected its annual financial results for the 12 months to June to be in line with its performance for the same period last year because of the loss of a significant contract and the partial loss of another contract during the year.
The company, which has been hammered by bad news for the past two years, said in a trading update: “Despite these significant contract terminations during the financial year, the group expects to deliver a similar level of revenue to that reported in the previous financial year ended June 30, 2011. The revenue lost has been made up by gains in other areas.”
Dirk Noeth, an analyst at Avior Research, said he expected Gijima to post a full-year loss with possible underlying earnings a share of 3c, although it was difficult to predict.
“The trading update didn’t give much of a surprise.” He said the information technology company’s management had been transparent throughout.
Noeth said Gijima’s recent cautionary announcements to shareholders could relate to the sale of its proprietary mine-planning software, which “could easily sell for a couple of hundred million rand”.
Gijima did not provide guidance in percentage terms of the possible outcome of earnings for the year. It said, however, that revenue and profit was “significantly impacted” by the cancellation of a contract with the State Information Technology Agency (Sita) to provide hardware break-fix services to the SAPS it had held since 2002.
The provider of data centre and technology integration services had entered into a month-to-month agreement with Sita from November last year. The government agency, however, said in January it was appointing a new month-to-month service provider pending the outcome of a tender process to officially appoint a new provider of the same maintenance services.
The parties reached a settlement after Gijima approached the South Gauteng High Court for an interdict.
The SAPS will issue a new tender for remote infrastructure managed support and Gijima will bid for this tender.
Earlier this year Absa cut an information technology (IT) outsourcing contract it held with Gijima for the past decade and insourced the work.
“The cost of rationalising the business in line with these contract terminations were borne in the year ending June 30, 2012,” Gijima said.
Revenue fell 12.8 percent to R2.5 billion for the 12 months to June last year. Gijima returned to profitability during the first half of the year under review, posting a profit of R28.6m during the six months to December last year.
The company said, however, new generation of services in mobility and cloud computing were bearing fruit.
“Despite the challenges in the 2012 financial year, management are confident that the remedial actions taken have positioned the company for a solid and profitable performance in the 2013 financial year,” it said.
The firm had also completed the implementation of its new structure and customer-centric business model.
It had also appointed senior IT industry executives to drive parts of the new model. It had cut contractors and permanent employees by 700 from 3 902 people. Of the reduction, only 200 were retrenched.
All associated costs would be included in the results.
Gijima’s trail of bad news started when the Department of Home Affairs cancelled the Who Am I Online biometric verification project (WAIO) contract with the company in 2010, citing concern over a lack of progress and escalating project costs.
As a result, Gijima made a net loss of R208.7m for the year to June last year, compared with a profit of R154m a year earlier.
Gijima shares closed 2.2 percent lower at 44c.