GijimaAst reports profit turnaround

Johannesburg, 27 Sep 2006

JSE-listed GijimaAst increased revenue to almost R2 billion and reported a profit in its latest annual financial results.

In the company`s results to end-June, it states it "is back on course as evidenced by the profitable revenue growth reported in the results". Revenue increased 24.4%, to R1.95 billion, which includes consolidated revenue from the former Gijima companies.

"The return to profitability was enabled by our disciplined approach to running our business. We successfully halted the revenue and margin declines reported in previous periods," says CEO John Miller.

"On a comparative basis, revenue growth of 6.5% would have been reflected," the company says of the effect the merger between Gijima and AST had on its results.

It reported attributable profit for the year of R38 million, compared to the R49.3 million loss it reported last year. While it says it has "successfully halted the revenue and margin declines reported in previous periods", revenue growth was limited by pressure to cut costs.

"Revenue growth was curtailed by ongoing pressure from our client base to reduce costs for commoditised outsourcing, as well as delays in major public sector contract awards, where we are awaiting results," it told shareholders this morning.

GijimaAst reported a R20.5 million increase in earnings before interest, tax, depreciation and amortisation (EBITDA), despite a R13.1 million reduction in foreign exchange gains. These went from R20.6 million in 2005 to R7.5 million in 2006.

Under pressure

Negatively affecting the company`s bottom line, as headline earnings declined by R21.2 million, were items such as amortisation of R5.8 million and impairments of R5 million. The company also had a higher-than-expected tax rate of 43.7%.

"The major differences between the reported rate and the statutory tax rate were as a result of deferred tax asset balances, which were written back on discontinued operations and dormant entities. In addition, deferred tax assets in a subsidiary were not raised due to uncertainty of future taxable income," it said.

Its tax rate is substantially higher than the 2005 rate of 5% - which excludes the once-off R83 million SARS trademark settlement - and "accentuates the disparity in headline earnings compared to 2005".

It also reported an after-tax loss of R12.5 million incurred in its Namibian subsidiary.

"Steps have been taken to address the problems which contributed to this loss."

Cash-on-hand increased by R117.2 million and cash flow from operations increased by R91.5 million, from R2.6 million last year. This was supported by reduced investments in working capital of R40.3 million during the year.

GijimaAst spent R27.4 million in capital expenditure during the year, most of which "relates to the procurement of income-generating computer equipment".

* ITWeb will provide further coverage of the analysts` presentation, which takes place this afternoon.