Technology group Gijima is facing a difficult and uncertain future after it warned on Tuesday that it had failed to comply with financial covenants related to borrowings of R213m and 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 has 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 year-ago figure of R5,16/share. Revenues slumped by R330m to R1,52bn in the same period.
The group is now planning another rights offer, the second in as many years, to raise a further R100m from shareholders. The rights offer will be fully underwritten by Gijima chairman Robert Gumede’s Guma Group of companies.
“Although good progress has been made with its turnaround activities, Gijima continues to experience tough trading conditions, which has resulted in the group not complying with the financial covenants related to the group’s borrowings of R213m in terms of the securitisation of debtors,” the group warned.
Gijima has now entered into a new agreement with financiers in terms of which the repayment terms of the loans, of which R107m is currently disclosed as short term, have been extended to be repayable in equal tranches of R52,5m in June 2017, June 2018, June 2019 and June 2020.
“The company can confirm that it will be able to pay its obligations when they become due and comply with securitisation of financial covenants based on budgeted and forecasted cash flows in future.”
In addition to the extension of the repayment terms of the R213m loan and the hoped-for further R100m injection from shareholders, Gijima said it has budgeted and forecast for cash flows in future that will generate sufficient money to allow the company to pay its obligations when they become due and thus stave off bankruptcy.
“The ability of the company and its subsidiaries to continue as a going concern depends on both achieving its future budgets and forecasts, and the raising of capital through the rights issue which is subject to various approvals. Should any of the above conditions not be met, there exists a material uncertainty which may cast significant doubt about the company and subsidiaries’ abilities to continue as going concerns and, therefore that they may be unable to realise their assets and discharge their liabilities in the normal course of business.”
There are signs, however, that the group’s turnaround strategy is working. Earnings before interest, tax, depreciation and amortisation showed a 69% improvement from the prior year. But pressure on the top line, with revenues down by 17% compared to 2013, is a worry. Gijima has blamed the pressure in part on challenges in the mining and manufacturing sector for the decline in sales.
“Over the year, R1,6bn from the renewal of contracts with key clients together with, in some instances an increased scope, has been concluded. This is an important indication that the continued efforts to retain significant clients, even in the face of stiff opposition, demonstrate our capability and they are a testament to our ability to provide service delivery excellence.” — (c) 2014 NewsCentral Media
