The board of Gijima, the technology group now 100% owned and controlled by businessman Robert Gumede, will sign off on its multi-year turnaround at the end of the financial year to June 2016, its CEO, Eileen Wilton, said this week.
The serious financial difficulties that affected the group, which ultimately led to its delisting from the JSE in April 2015, now appear to be behind it. It is profitable on a monthly basis and is poised to make inroads in both the private sector and in government business, Wilton said.
As reported by TechCentral on Thursday, Gijima is now moving to bolster its board, appointing former MTN Group CEO Sifiso Dabengwa, former Business Connexion financial director Alan Farthing and former Accenture chief operating officer Clive Butkow as nonexecutive directors.
Wilton hopes the three men will bring skills and experience that will help Gijima expand in new areas.
Wilton described the completion of the turnaround strategy as “a significant milestone” for Gijima.
“There are many measures the board was looking for from me, but there is only one measure that really counts and that’s that we have returned to profitability month by month,” she said. “We have completed all cost-cutting events and stabilised revenue.”
It’s a significant improvement from the second half of 2014, when TechCentral reported that Gijima was teetering on the brink of bankruptcy.
It warned when publishing its 2014 annual results that it had failed to comply with financial covenants related to borrowings of R213m, with auditor KPMG warned of “the existence of a material uncertainty which may cast significant doubt on the company and subsidiaries’ abilities to continue as going concerns”.
Gijima reported a full-year loss for the year to 30 June 2014 of R152,4m, from a loss in 2013 of R210,8m. The headline loss was 77c/share, an improvement from the 2013 figure of R5,16/share. Revenues slumped by R330m to R1,52bn in the same period.
In February 2015, Gumede’s Yebo Guma Investments made an offer to buy out minority shareholders, paving the way for a delisting.
This was after a rights offer in December 2014 saw Gumede-controlled entities increase their stake in Gijima from 46,7% to 88,4%, leaving a small free float of 11,6%.
“We wanted to complete turnaround out of the media eye,” Wilton said this week. But this didn’t mean the group took the opportunity to take an axe to employee numbers.
“We haven’t done many retrenchments in the past three years — a total of 151 — but obviously we had more turnover than that.”
Gijima’s headcount has fallen from just under 3 000 people to just under 2 000 today, Wilton said. “We have worked hard to retain key skills and competencies,” she said.
She said the group has become highly successful at retaining key clients after losing a number of crucial government projects, including a high-profile contract with home affairs. “What has been lagging is the acquisition of new customers.”
The strategy for the next three years is staying relevant in a changing enterprise IT environment that is increasingly dominated by cloud services as well as securing new client wins.
“It’s potentially harder to do now that we are unlisted, but we are quite transparent with customers and potential new customers [about our numbers],” said Wilton.
“We give undertakings to all customers that we comply with the Companies Act, with King governance and best practices. We have 14 of the top 25 companies on the JSE as clients and they require us to submit to audits that we are achieving undertakings in terms of corporate governance. We share our financials with them regularly. We try to be as transparent as we can be.”
The revenue mix for Gijima has shifted sharply to the private sector in recent years, with only 15% of sales from the public sector. But Wilton expects government wins to reduce that percentage.
“In the last year, we got a new tender from the South African Police Service. We also have new awards from City Power, Mpumalanga Health and others. And we are working on key strategic opportunities.”
Shortly before Gijima was delisted, it announced it had secured new arrangements with debenture holders to see it through the remainder of the turnaround. The debentures are managed by Futuregrowth (about 80%) and Investec (about 20%).
“Our debt is manageable and we are meeting all of our covenants,” Wilton said.
Beyond winning new clients, Gijima is placing a big bet on cloud computing, the Internet of things and, with IBM, cognitive computing. “We have drawn much closer to IBM,” she said.
Gijima has established a formal contract with IBM and mobile operator Vodacom, with all parties committing investment funds to build cognitive computing solutions based on IBM’s Watson technology. — © 2016 NewsCentral Media
