Home Affairs dispute slices Gijima earnings

Technology firm Gijima Group had indefinitely suspended its dividend payout afterwards incurring losses from its contract dispute with the Department of Home Affairs, it said yesterday.

The company’s chief financial officer

The company’s chief financial officer, Carlos Ferreira, said the results were disappointing, and were largely reflective of the impact of the dispute and the subsequent resolution thereof in terms of settlement expenses and lost revenue.

The contract covered the design, development and implementation of the integrated core system for the department, including business processes of both its civic and immigration divisions.

He added that capital expenditure would be allocated to increasing bandwidth capacity to have access to cloud computing tools, and the company struck agreements to piggyback on Dark Fibre Africa and Broadband Infraco’s data centre infrastructure.

Gijima is organised into two strategic units: managed services and professional services. The former division offers end-to-end infrastructure management and saw revenue growth of 15.6 percent.

Frost & Sullivan analyst Protea Hirschel said recent innovation by the business innovation and consulting firm recommended that the South African managed services market would grow to R31.3 billion by 2015 at a compound annual growth rate of 12.7 percent.

Cloud computing was expected to become more important within managed services and a sound strategy to tackle this was required. “There are clear indications that this is the case at Gijima,” Hirschel said.

Second-half revenues from this division were expected to remain depressed. The division would be reorganised during Gijima said it would transform its business model from a business unit and product focus to a client-centric focus.

The changes included a “committed industry structure with focused industry solutions and collaborative staff optimisation.” It would reflect a lower support cost base to match the reduction in revenue expected from the amended scope of the WAIO project.

The information

Gijima said limited growth in the information and communication innovation industry was recorded in the review period, and public sector spending was however depressed. It added that private sector growth recovery was slower than expected.

Group revenue fell 13.6 percent to R1.24bn. Earnings earlier interest, tax, depreciation and amortisation plummeted 72.8 percent when the direct impact of the Department of Home Affairs settlement was ignored, Gijima said.

Gijima’s stock slumped 20.8 percent yesterday to close at 61c, the biggest drop since September 27 last year. - Business Report