Listed outsourcing company GijimaAst will spend cash in the bank “wisely” on developing its intellectual property.
However, the company, which showed headline earnings growth of 106% yesterday, concedes its healthy position could make it a takeover target.
It generated R211.6 million in cash during the six months to December, taking its entire cash balance to R623 million.
Group FD Carlos Ferreira says GijimaAst has a “corporate memory of where we came from”.
When the group started out as a merged entity, almost five years ago - with the merger of AST and Gijima - it had a bank balance of R35 million, and quite a bit of debt. It still has debt, but is now cash-positive on a net basis.
Ferreira says the company's healthy cash flow position does make GijimaAst an attractive takeover target, even though it has debt. However, he says management is focused on running it profitably for at least the next 10 years.
GijimaAst's shares closed at R1.24 yesterday, after its results were released, which is a new 52-week high. Despite the surge in value, the company is still under-priced and has a price-to-earnings ratio looking forward of 7.61.
Control the debt
Ferreira says the company wants to look at restructuring its debt, because, at the moment, it is paying out more interest than what it earns, causing what he calls “interest leakage”. The company has R257.2 million in long-term debt and R100 000 in shorter-term debt.
GijimaAst will also work on developing its own intellectual property, and packaging proprietary solutions, to sell into the local and African markets.
Ferreira says the firm will focus on industry verticals in which it has proprietary software. One example of this software is the in-house mining system, mineRP, which is resource planning software for use in the mining industry.
CEO Jonas Bogoshi says this software, a world first, will aid margins in its mining technical business, GMSI. “Demand for this software shows that we are really ahead of the pack.”
Other areas that GijimaAst will focus on include the financial services sector, manufacturing and the public sector, which accounts for 47% of the company's R1.44 billion in revenue. Bogoshi says the possible pipeline in the public sector will - over the next few years - dwarf the R2.5 billion Home Affairs “Who Am I Online” project.
The organisation will also consider adding small companies to its portfolio to bolster its intellectual property in niche areas, although there are no major deals on the table, says Bogoshi.
In the pipeline
Bogoshi adds that the company has a possible contract flow that includes seven deals worth between R5 million and R10 million, four worth between R10 million and R50 million, and two that could be worth more than R50 million. These deals are at various stages in the sales process, and include contracts for government.
Among the recent public sector deals that GijimaAst will start implementing soon, is the backbone aspects of the South African National Roads Agency's open toll gate system. Bogoshi says Austrian company Kapsch is providing the cameras and GijimaAst will provide the backbone that links the cameras to a data centre, storage and collection of the data, as well as a billing engine.
This project will start being rolled out shortly, he says. In addition, the company has been contracted to put the deeds registration process online, and clear up the database, which will make registering property quicker.
Ferreira says the sort of intellectual property that goes into these projects is being packaged to be sold to African governments. So far, GijimaAst has bid on identity management projects in Malawi, Tanzania and Zambia, and will shortly bid for a project in Ghana.
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