GijimaAst`s business improvement programme has come to an end and the company is now entering a growth stage, says CEO John Miller.
Speaking at the presentation of the group`s results for the year to June 2005 yesterday, Miller said the first stage of the turnaround process was survival, while the second stage - the main focus in the 2005 financial year - was stabilisation.
"The focus now is growth," he said. "We need to grow this business and grow it aggressively."
However, he added that the company was not looking for acquisitions. "I believe there is enough in the company to grow organically."
The group released two income statements yesterday - one audited and the other "normalised". The statutory audited results include two months` contribution from Gijima, which was merged with AST in April, as well as exceptional figures such as the settlement of the dispute with the South African Revenue Service (SARS).
Cleaned up
Financial director Carlos Ferreira said that with almost 800 million shares being issued in May, normalised headline earnings per share (HEPS) of 6.78c was a fairer base to provide a comparison in future.
The normalised HEPS incorporate a full year`s contribution from Gijima and exclude the effect of the share issue and the impairment of a deferred tax asset of R83.1 million. Reported HEPS were 15.66c, compared with a prior-year loss of 9.15c.
Normalised revenue amounted to R1.85 billion, compared with reported revenue of R1.59 billion, while a normalised net profit of R65.37 million compares with a reported loss of R64.83 million. Last year the group reported a R141.66 million loss.
Ferreira said the group`s cost base had been reduced from R2.08 billion in 2003 to R1.39 billion in the 2005 financial year. The reductions came from the business improvement programme (R320 million), rightsizing (R190 million) and the sale of non-core businesses (R181 million).
Miller said the business structure had now been simplified and the focus was on two delivery engines - managed services (the former infrastructure services and networks divisions) and solutions (including system integration and industry specialisation).
"We promised you a clean business - you have that," he said. "We`ve done what we said we would do."
He added that the group was well positioned in its chosen markets and growth would now be driven from a sales perspective.
Analyst`s view
Analyst Irnest Kaplan, MD of Kaplan Equity Analysts, describes the results as "very reassuring".
"Things are getting better - they`re improving margins and cutting costs. From the financial perspective, the company is in much better shape."
He says the only disappointment was the performance of the solutions business, which experienced a 24% fall in revenue from R748 million to R570 million. This could be cause for concern since the market, while not buoyant, is stable.
"But there were some clients who didn`t give them business because they weren`t sure AST was going to be around for much longer," he adds, saying that this was not only because of the group`s previous financial position, but also because of negative publicity.
However, the reputation has improved and the group also now has meaningful black economic empowerment.
Kaplan says he would like to see an improvement in the solutions division`s results for the 2006 financial year. He expects the group overall to achieve 5% to 10% growth in revenue to about R2 billion, although he says the occurrence of so many once-off items makes it difficult to forecast accurately.
However, he believes the company is fairly valued at the current share price. The GijimaAst share closed 1c down at 61c on the JSE yesterday. The share was trading at 60c by midmorning today.
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