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Gumede moves to delist Gijima

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 18 Feb 2015
Robert Gumede believes Gijima will be better able to focus on a turnaround strategy in an unlisted environment.
Robert Gumede believes Gijima will be better able to focus on a turnaround strategy in an unlisted environment.

ICT services company Gijima is set to leave the bourse after 15 years as a listed entity, as Guma - controlled by Gijima chairman Robert Gumede - is offering to buy the 11.6% Guma does not already own.

Guma's bid is at 220c a share, a significant premium to the 150c Gijima closed at yesterday. The move comes after Gumede's Guma Group increased its stake in Gijima to 88.3% during the festive season on the back of a R100 million rights offer.

The rights offer, fully underwritten by Guma, failed to gain traction among Gijima's other shareholders. In total, shareholders owning 49.9% of Gijima's stock took up the offer, but this includes Guma's combined 46.7% stake.

In a statement to shareholders, the parties say because there is such a small free float left listed, and the fact that Gijima's turnaround is ongoing, "Guma believes it is in the best interests of the company to be held 100% by the Guma Entities and to delist, thereby enabling it to complete the turnaround in an unlisted environment".

Tough times

Gijima's market capitalisation is currently R89.8 million. It has recently been through turbulent times, and is just more than one-third through yet another three-year turnaround strategy. In the year to June, the company reported turnover lower at R1.5 billion, down from 2013's R1.8 billion, but trimmed its net loss from R294 million to R153 million.

However, the company has needed to roll over its R213 million debt, and has entered into a new deal with its financiers, pushing out the due date of the debt into equal tranches due between 2017 and 2020.

In its heyday, in April 2010, its share price reached almost R50, but this was just before the Department of Home Affairs cancelled the multibillion-rand contract in a surprising letter that stated the deal was "invalid". It subsequently locked Gijima staff out of its Pretoria headquarters, and the state attorney had to intervene before staff members were let back in.

Chequered past

The following March, Gijima said it had reached a settlement with home affairs after the department canned the "Who Am I Online" contract almost a year ago. The settlement impacted earnings per share by R27.99c, as Gijima wrote down invoices and absorbed legal costs.

Settling with the department hit the company's profitability as it incurred R375 million in costs, of which R263 million related to home affairs debt that was written off. In addition, the company wrote off another R80 million in future discounts it promised the department, and another R30 million in expenses related to the settlement. In total, this was about a year-and-a-half's worth of profit.

In 2012, the company embarked on a retrenchment exercise, aiming to trim between 8% and 12% of its R1 billion-a-year staff bill through retrenchments because of declining revenue due to lost deals and increasing costs. It recently lost half an Absa deal and a police desktop contract.

In September 2012, then CEO Jonas Bogoshi quit the company, a move followed by the resignation of CFO Carlos Ferreira. Its current CEO is Eileen Wilton.

Guma's move, which already has the support of shareholders holding just more than 40% of Gijima's shares, is subject to conditions. No dates have been announced yet for when the delisting would take effect.

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