Gijima posted a huge, R210,8m loss for its 2013 financial year to June, but management promises its turnaround efforts are starting to bear fruit and says this view is supported through investments from key shareholders.
Chairman Robert Gumede says he has put R75m of his “own, hard-earned money” behind the company as part of a recent rights offer that raised R150m from shareholders.
One of the biggest revenue losses recorded in the year was of R160m for a contract with a client whose name the company won’t disclose. Interim CEO Eileen Wilton says R153m of this was as the result of a subcontractor that allegedly failed to meet its obligations. “Not only was it not delivering, but didn’t have working capital to do so,” Wilton says. This resulted in Gijima paying debts on the subcontractor’s behalf.
“I don’t think the fact that we’re making a loss comes as a surprise to anyone,” she says. “That is tragic and it is a big loss and a big number. But if I take off a number of once-off events, our turnaround is taking hold.”
Wilton says one indication of this is that the second-half loss from normal operations was R10m, compared to R50m in the first half.
“We have driven costs out of the organisation. We’ve been on a big right-sizing drive, as anyone would in the circumstances.”
By the end of September, Gijima will have succeeded in reducing monthly expenses by R20m, Wilton says.
Gijima has reduced its staff complement by 850 people — 350 of whom were due to the sale of mining and technology consulting business MineRP and the loss of a contract with Absa in the prior year.
A further 500 staff left the organisation, of which 91 were retrenched.
“In companies like ours, there is usually a 70:30 mix of contractor to permanent. The first focus is contractors and retaining only those skills that are essential. We [removed] a number of contractors and in the last year have introduced a new performance management system and got rid of those who haven’t performed.”
Wilton says Gijima has also “absorbed natural attrition” and hasn’t replaced staff that resigned and whose skills are deemed non-critical. “Staff turnover during the period has been well within industry norms,” she adds, seeking to reassure shareholders that staff are not fleeing the company.
On the positive side, Wilton says the company has not lost a single renewal on major clients in the past year. It also secured two large renewals, one worth R800m over five years, and another indefinite renewal for a large company with a market capitalisation of about R80bn. The company won’t disclose the names of the companies for confidentiality reasons.
Gijima’s recapitalisation, which took the form of a R150m rights offer, was 83% subscribed, according to Wilton, with Gumede acting as a “significant investor” and financial institutions Investec, Allan Gray, Futuregrowth “putting their money where their mouths are” by underwriting the move.
“Dealing with corrections in your company is not a once-off thing,” Wilton says. “We will continue to drive culture of continuous improvement and will continue to drive our retentions and our revenue-generating capacity.”
Wilton says Gijima realises it had not spent “sufficient time and effort on the generation of new revenue”.
“This is a key thing we’re turning around. We already have a new business development arm. I’m very confident when I talk to you in a year’s time, we’ll have this revenue generation firmly in hand.”
Meanwhile, Gumede has promised that the process of finding a permanent CEO and chief financial officer will be finalised by the middle of next week. Both positions are currently filled in an interim capacity — by Wilton in the CEO chair and Liesl Tweedie in the chief financial officer role — following the resignations of Jonas Bogoshi and Carlos Ferreira. — (c) 2013 NewsCentral Media