GijimaAst's profit jumps

Listed outsourcing company GijimaAst has made a good start to the 2010 financial year, as headline earnings per share shot up 106% in the six months to December.

The increase in headline earnings per share is despite revenue being down 3.6%, to R1.44 billion. However, operating profit was up 4%, to R134.9 million, and net profit improved to R85.8 million, from R41.7 million.

As a result of the company's strong performance, it declared a maiden interim dividend of 2.5c a share.

“This is a good start to the 2010 financial year and a very pleasing performance at a time of local and international turmoil,” says CEO Jonas Bogoshi. “We have weathered the downturn very well so far, assisted by the fact that the bulk of our income is contractually guaranteed multi-year or annuity income.”

Headline earnings per share improved to 8.83c from 4.28c and earnings per share improved to 8.8c from 4.27c. However, stripping out an exchange rate translation loss, headline earnings per share were up 33%.

GijimaAst says the jump in headline earnings per share is because it has removed the impact of inter company loans, which had to be recognised on the income statement as a gain or loss depending on which way the different currencies moved.

The company also saw solid cash generation, with cash generated from operations up 85%, to R174 million, and its net cash balance up 85%, to R623 million. At December 2008, the company had cash-on-hand of R337.5 million and R485.6 million at the end of June 2009.

Frost & Sullivan says Last year's tough market conditions forced GijimaAst to cut costs and focus on higher margin operations. As a result, the company managed to improve profit, despite lower revenue.

“The increase in earnings per share attests to GijimaAst's ability to weather the recessionary environment over the last year,” says Frost & Sullivan ICT analyst Protea Hirschel.

“In part, this is due to the large contribution that the public sector has made to overall revenue, which reduced the impact of spending cut-backs or delays by corporates. The public sector now makes up 47% of total revenue,” she says.

Hirschel notes GijimaAst has also identified additional sectors, which it previously did not service extensively, as growth opportunities. This includes the insurance industry, where it has signed multi-year support contracts with companies such as Sanlam for desktop support, and the oil sector, where it offers integrated forecourt solutions.

“The group has also focused on developing its professional services portfolio over the last year, with positive impact on overall profit margins,” Hirschel adds.

“This has allowed the company to retain its revenue growth path, despite declining capital expenditure by many of its customers. Hardware sales now make up less than 20% of overall revenue and Frost & Sullivan expects this trend to continue,” she says.

The company's share opened at 117c today and was up a cent in early morning trade. However, it is close to its 52-week high of 120c, which was on 2 February.