GijimaAst`s acquisition adds to bottom line

By Nicola Mawson, Contributing journalist

Johannesburg, 03 Aug 2006

GijimaAst`s acquisition of the half of Thuso Information Technology that it does not already own is expected to add 3% to its bottom line, for an investment of R3.8 million.

The acquisition, which will be done under the banner of GijimaAst Holdings - a wholly-owned subsidiary of GijimaAst Group - will leave the company with 100% of Thuso. It will acquire the other half of the issued share capital, worth a nominal value of R1 each, from Magoshi Investment.

GijimaAst, which prepared illustrative effects of the transaction based on the financial information of both companies for the six months to the end of last year, expects to see a 3.19% increase in earnings per share, from 1.05c to 1.08c. Headline earnings per share are expected to move up 3.14%, from 1.07c to 1.10c.

Net-asset value will be 0.05% lower at 27.62c a share from 27.63c a share. Tangible net-asset value will be 3.02% down, at 16.08c a share from 16.58c a share. This is a result of paying for the acquisition in cash, effectively removing R3.8 million from the company`s assets and replacing it with about R1 million in Thuso assets, says GijimaAst financial director Carlos Ferreria.

Ferreria says IT companies` inherent value is not in assets, but rather in services and staff. He states the benefits are more likely to be realised indirectly, as the company believes it can make Thuso`s contracts more profitable.

"As sole shareholder of Thuso, GijimaAst would be able to extract synergies from control of Thuso through the optimisation of facilities and working capital and operational efficiencies arising from the combination of GijimaAst`s Resource Solutions Business Unit and Work Force IT," says a company statement.

Work Force IT is a wholly-owned subsidiary of Thuso and serves as its resource placement arm. As GijimaAst is an empowered company in its own right, Thuso will remain an empowered company after the conclusion of the transaction, it states.

The deal, effective on 3 July, is still subject to regulatory approvals and GijimaAst`s board approving the sale and purchase agreements. In addition, as there are related parties, an independent expert will be appointed to assess the deal.