Listed technology company Gijima has plunged deep into the red, reporting a headline loss of 21,73c/share in the year to June 2011 on the back of the settlement of a controversial IT deal with the department of home affairs.

The company was forced to write off R373,9m during the first half of its financial year to extract itself from the disputed Who Am I Online (WAIO) contract.

CEO Jonas Bogoshi says settling out of court was the most prudent move for Gijima. “To sue government … and be in litigation for five years is not in the best interests of the company.”

As a result of the termination of the agreement, revenue for the year declined by 12,8% to R2,57bn, but the company is quick to point out that revenue would have increased 5,3% if the WAIO revenue from last year was excluded.

No revenue was recorded from the WAIO contract during the financial year under review. Earnings before interest, tax, depreciation and amortisation (Ebitda) reflected a loss of R211,8m, which includes the settlement expenses.

Gijima has retrenched 200 staff since its last results announcement six months ago. Bogoshi says some of the layoffs pertain to the WAIO contract and others were simply expiring contracts that the company chose not to renew.

The board has elected to suspend dividend payments while it reviews the group’s financial position, but Bogoshi says it is committed to resuming dividends as soon as conditions allow.

He says Gijima is on the path to recovery. Despite the WAIO settlement “the underlying business is normalising”. — Craig Wilson, TechCentral