GijimaAst posts positive interims

Local ICT service provider GijimaAst's interim results, for the six months to 31 December 2008, reflect a 25% revenue increase, to R1.5 billion (compared to R1.2 billion in December 2007). It also posted an EBITDA increase of 67% before adjustments for exchange rate gains and losses.

According to CEO Jonas Bogoshi, the company is pleased with its results, particularly given current economic conditions.

The bulk of the group's revenue comes from services (80%) and 20% from product sales. This is further split into its managed services (49%) and professional services (51%) divisions.

On a sector basis, 43% of its business comes from the public sector, 18% from mining, 16% from financial services and the rest from manufacturing, retail and hospitality and other sectors, respectively.

The global financial situation has hit the company's mining division (GMSI) hard, Bogoshi says. “This business has not performed at all,” he states. “Revenue is exceptional, but profit is disappointing.”

This, says Bogoshi, is because the projects it has signed that would have generated high margins on its own proprietary software have been cancelled or postponed due to the economic crisis. The company is relooking the strategy and structure of this division, and will redeploy some of the staff elsewhere in the group, he adds.

The group has reflected significantly higher capex expenditure than usual (R38 million over the six months versus an average annual expenditure of R40 million). This, it says, can be attributed to IT investments and investments in its new building.

“We invested R11.3 million in the upgrade of our SAP ERP system, R11 million in the implementation of our ITIL unified framework for service management, R2 million on leadership development and R1 million on the upgrading of the project management office. We also consolidated our Gauteng operations into an enlarged head office campus, which required an investment of R15 million,” Bogoshi says.

Looking forward, Bogoshi notes the company's managed services division has been awarded eight new deals worth between R5 million and R10 million, and a further three in the R10 million to R50 million mark. On the professional services side, one deal worth over R50 million was awarded, as well as three worth R10 million to R50 million and six worth R5 million to R10 million.

Bogoshi, like everyone else in the industry, is not making any predictions as to when the downturn will run its course. That said, “We expect the downturn to last 18 to 24 months,” he says. “And if you look at the impact on our mining business, as a company we need to continue to be prudent.”

Bogoshi believes service is what is going to win deals going forward, noting that all of the deals it has won away from competitors over the past year have been awarded on the basis of service. He also believes the company's ITIL investment, which he categorises as expensive and ongoing, is what will make a difference and “allow service delivery to become systematic”.

“We're seeing demand from customers for services on demand, like software as a service,” he says. “Customers want to pay for usage not for software or equipment.”

Bogoshi expects the outsourcing business to continue to do well, and to improve as companies increasingly focus on their core business and outsource non-core activities as is usual in any downturn. He also expects skills demand to continue to outstrip supply, and that green IT and virtualisation will continue to gain traction in data centres as companies look to drive down costs.