Black-owned ICT business solutions provider Simeka Business Solutions Group is positioned to make strategic acquisitions to fulfil its objectives of expanding into Africa.
The company, which yesterday released its annual results to end-May, has cash resources of R16.5 million. Revenue reached R326.1 million, which includes contributions from acquisitions of MICT and Motoma Mithratech. This was a 247% increase on the previous period, which saw revenue at R93.8 million.
CEO Mohammed Varachia says the group's strengthened financial position will enable it to pursue strategic acquisitions that will aid it to expand into Africa. In addition, it aims to penetrate niche market segments. "We intend to capitalise on our existing document-management and information-security services to grow these areas into major revenue generators," he adds.
He says the company would probably look at raising debt to finance any acquisitions in the future as it can leverage its balance sheet. Its obligations in terms of vendor financing should be discharged in the next year or two, giving it more room to raise capital.
Varachia adds the company is looking at opportunities at the moment. "The group's operations are well-positioned to leverage the rapid economic growth in their markets, such as financial services and telecoms, to drive organic growth going forward," he says. "In addition, revenue streams are generated to a large extent by long-term contracts, which bodes well for sustainability."
Merger history
In 2005, Xantium Technology Holdings acquired Simeka Management Consulting and, earlier this year, merged with MICT Solutions Group, which included the acquisition of Motoma Mithratech. The resulting company was called Simeka Business Solutions Group, and was listed on the JSE's Alternative Exchange.
After the merger, the company underwent a restructuring process that saw the establishment of a four-pronged group structure. The company now has four divisions: consulting; solutions implementation; post-implementation support; and assembly and manufacture, it told shareholders.
"Although we have consolidated the new group structure, integration of the underlying businesses is an ongoing process," said Varachia.
Leveraging cash
Varachia attributes the improved results to good performances from the group's underlying businesses. "Management capitalised on healthy business units by introducing stringent processes for debt and credit management to significantly grow net cash from operations, while at the same time growing the customer base and maintaining standards of delivery," he says.
As a result, the company has been able to discharge a total of R131.6 million in vendor liabilities during the year. Of this, R22.7 million was paid from cash generated from operations and the balance was paid through issue of shares. Headline earnings per share (weighted in issue and to be issued), which have been adjusted to reflect its short-term vendor obligations, were 39% higher than the previous year at 9.9c.
On Monday, the company's shares closed at 50c, and were trading at 55c by 2.30pm, a 10% improvement on the day.
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