AltX-listed Simeka BSG, formerly Xantium Technology Holdings, today posted interim results to November 2005 reflecting revenue of R97.7 million that almost tripled from the R38.8 million at this time last year.
Since the interim period, the group has acquired Simeka Management Consulting and merged with MICT Solutions Group and Motoma Mithratech ("the transactions") to become one of the largest black-owned and controlled ICT business solutions providers.
Notwithstanding the surge in revenue, net profit increased marginally to R6.2 million. James Murray, former joint-CEO and now an executive director of Simeka BSG, attributes the static profit line to the R7 million aggregate losses incurred in two of the group's divisions.
"The losses arose partly due to operational challenges such as the slow recovery of debtors. However, a large portion of the losses was anticipated as we incurred costs to rationalise the divisions for the new group structure following the transactions."
He adds that first-time compliance with a new international accounting standard resulted in an imputed interest charge of R1.2 million levelled against income, which further depleted profits.
Murray is confident the losses have been stemmed post the period by discontinuing the loss-making divisions and introducing measures such as MICT's strict credit vetting procedures.
Cash generated from operations spiked from R0.3 million to R5.5 million as the group continued to benefit from the buoyant ICT sector and its blue-chip customer base. The healthy cash flow saw the group end the period cash flush with R7.6 million on hand.
Murray explains that the net current liability on the balance sheet is "primarily due to outstanding vendor liabilities relating to historic acquisitions". Looking ahead, he is confident a net current asset position will be restored by the end of the financial year in May 2006.
"A successful issue of shares for cash in December 2005 and continued strong cash flow will assist in accelerating vendor payments and return the group to a positive net current asset position by year-end."
Murray last week elected to concentrate exclusively on business support and expanding the group into Africa, stepping down from his position as joint-CEO and continuing as an executive director. Mohammed Varachia, MICT's CEO, will head the group together with Dr Popo Molefe, who has remained the group's non-executive chairman. A reconstituted board reflects Suren Singh as CFO in place of Pieter Johnston who resigned last week, while Kamal Ramsingh and Madoda Papiyana have assumed the new roles of COO and human resources director respectively.
The non-executive directors include new appointees Barry Fraser, Robinson Ramaite and Tozamile Botha as well as Bobbley Molefe who moved last week from an executive position.
Varachia points out that Simeka BSG's new board is now made up of 90% HDIs, while the group is majority black-owned. "Our BEE platform is a major competitive advantage which we will seek to entrench through continued efforts in this regard." Fifty percent of Simeka BSG's executive management currently comprises HDIs.
Looking ahead, Varachia is optimistic about Simeka BSG's prospects. "The interim results do not incorporate the financial benefit to the group of the transactions on account of their completion post the interim period. However, the inclusion in the group for the first time of Simeka Management Consulting, MICT and Motoma Mithratech is expected to boost revenue to R315.2 million at year-end, again tripling our current revenue base." He emphasises that the group's bottom line is forecast in the revised listing particulars to increase substantially to at least R25.5 million.
Varachia says management will continue to focus on bedding down the new companies in the group and consolidating operations. "The integration of top-level management has already successfully happened ahead of schedule, which bodes well for the smooth integration of the group."
He concludes that Simeka BSG's offering is well-aligned with international ICT trends favouring integrated solutions providers that can cross-leverage skills to implement IT business strategies. "This enables service providers such as Simeka BSG to guide the client from strategy conception to solution implementation and to offer ongoing maintenance and support, which is a key differentiator in our industry."
For more information, please visit the Simeka BSG Web site at www.simekabsg.co.za.