GijimaAst seeks profits, acquisitions

GijimaAst hopes to improve its profit margin through the full integration of DTS, capital expenditure on business process optimisation and a renewed look at its business alignment, which could see it pursue acquisitions.

Speaking at an analyst briefing yesterday, the company's senior management said it had not yet felt the benefits of purchasing the remaining shareholding in DTS, as the deal had only been concluded in the last month of the half year.

Nevertheless, group financial director Carlos Ferriera said now the division no longer required ring-fencing, it would deliver annual savings of R17.6 million. Approximately half of this saving should come into effect in its second half financials, he added.

Ferreira said its next reporting period would see capital expenditure of R8 million on an upgrade to its Remedy 7 software solution and R3 million on a seamless interface between the updated solution and its SAP ERP system.

"Optimisation of business processes is expected to deliver annual administration cost savings of about R30 million, at a cost of R10 million over the next 12 to 18 months," he explained.

Ferreira said, added together, DTS and business process optimisation should deliver around R47 million to the company's bottom line.

GijimaAst CEO John Miller added the company would embark on a margin optimisation programme to enhance its profit margins.

"This programme is not about cutting costs. We are reviewing the businesses and market we are involved in and establishing if these provide the correct mix, or if we should pursue a change in the mix," he said.

This could lead to acquisitions, said Ferreira, and the company foresees increased consolidation in the IT services arena.

"Take for instance current offerings. Transnet and Eskom's outsourcing contracts are up for grabs and by the way you get arivia.kom too. We are having a look at the proposal," Ferreira told analysts.

Miller confirmed the company would consider acquiring arivia, but noted it was not a foregone conclusion that it would actually bid for the company.

"There is a lot that needs to be understood about [arivia] before the board can take an educated decision on whether or not to bid. For instance, the value of the outsourcing contracts is less important than whether the profit margins make the contracts worthwhile," he explained.

"We also have to consider the requirements the deal places on the successful bidder in terms of arivia's workforce. If we are required to take on the entire workforce at their current packages with all benefits in place, it may not be worth our while," he added.

GijimaAst's share price closed 6% down yesterday, at 85c, as four million shares changed hands.