Listed ICT company Gijima has reported a full-year loss, the first in many years, as the settlement agreement with the Department of Home Affairs (DHA) impacts its full-year results.
The company this morning reported results for the year to June. It said, as a result of a settlement deal with the DHA over the canned 'Who Am I Online' deal, that revenue dropped 12.8%, to R2.57 billion.
Gijima was awarded the contract to overhaul the department's systems and improve security in 2007, and the contract was signed the following year. The project aims to replace outdated and obsolete legacy systems, as well as improve security.
However, last April, the department cancelled the deal, arguing the contract was invalid. Gijima reached a settlement with the department earlier this year, backtracking on its previous threats to take the department to court to uphold the contract.
At the time of the settlement, it said the agreement was in the best interests of the company as litigation would result in management not being able to focus on operations.
Last year's figures included revenue of about R500 million from the home affairs deal, but Gijima did not book any income from the project in the year to June. Stripping out 'Who am I Online' income from last year, Gijima's revenue would have grown 5.3%.
Government contracts accounted for almost half of Gijima's revenue at the end of last year. However, this percentage has dropped to 36%, because of the lost income.
Hefty price
Settling with the department resulted in Gijima incurring R374 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, which it has promised the department, and another R30 million in expenses related to the settlement.
Although the bulk of the expenses went through its books in the first half of the year, the settlement negatively affected full-year profitability. Earnings before interest, tax, depreciation and amortisation (EBITDA) reflected a loss of R211.8 million. The group posted a headline loss of 21.73c a share.
Gijima's first half was a “watershed” period for the company, says CEO Jonas Bogoshi. He says the write-offs the company made to settle with the Department of Home Affairs over the 'Who am I Online' contract led to a full-year loss for the “first time in many years”.
CFO Carlos Ferreira says the loss of revenue from the contract was a “big hole” that Gijima could not fill. Gijima has put systems in place to reduce the chances of a similar event occurring in the future, says Bogoshi.
Positive pipeline
Bogoshi says Gijima will start earning revenue from the project again towards the end of the next financial year as it starts rolling out infrastructure. He adds the company has a pipeline of R1 billion worth of new deals, including some with other government entities.
During the second half of the year, Gijima was inward focused in a bid to put the contract behind it and focus on creating value for shareholders, says Bogoshi. This led to the creation of 'Vision 2025', which is the company's transformation programme.
The group has reorganised its management structure and business model over the past seven months as part of its Vision 2025, which focuses on client-centricity.
Gijima aims to better understand individual industries and take advantage of a growing shift towards mobile computing. “We aim to position ourselves as the local leader in cloud computing services, because this model allows convenient on-demand access to a shared pool of computing resources; our clients are able to more effectively spend their ICT budgets and realise increased value,” says Bogoshi.
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