Simeka delivers solid results

Johannesburg, 25 Jan 2008

AltX-listed ICT company Simeka Business Solutions Group expects to continue delivering solid growth, despite some tightening in the local economy.

Yesterday afternoon, the company released its results for the six months ended 30 November. During the period, the organisation upped revenue 44%, to R309 million, off R215 million in the corresponding period. Continued focus on operating costs saw headline earnings jump 55%, to R34 million.

Speaking to analysts this morning, Simeka CEO Mohammed Varachia said the company was well positioned to maintain its above-industry-average growth delivery.

"Simeka is a focused business, servicing niche areas which we have identified over time. We have done a lot of work to acquire, build and integrate companies in the last few financial periods. And the benefits of this strategy are showing. This will continue to be our strategy going forward and I am confident it will continue to produce the goods," he explained.

Entering govt

Despite possessing the black economic empowerment credentials the public sector favours, Varachia said the company has maintained a "prudent" approach to government opportunities.

"We have always been cautious about entering the public sector as it puts strain on a company's working capital. In the last six months though, we have taken some successes which our cash flow can handle. We do not intend to make an aggressive foray into the public sector. We're taking small steps," he revealed.

In the period under review, Simeka added contracts from SA's Auditor General, the Department of Justice, the Department of Land Affairs and the State IT Agency.

Open, shut case

Simeka's board has also taken strategic decisions to exit two businesses, open an office in Nigeria and form a company to host its new Microsoft competency.

"During the period, we took a decision to exit our shareholding in Spec Systems and wind down the ICSS business. Frankly, we didn't believe that these businesses were sustainable at a level which the board considers acceptable," said Varachia.

At the same time, the company has invested "several million rands" into the establishment of a Microsoft competency.

Varachia explains: "We've identified Microsoft as a key growth area for the company, particularly in the mobile worker and mobile applications space. We've formed a new company under our Mint Net consulting and applications division to house this investment. We should see another company in this division in the next six to 12 months to hold our Microsoft-based software development initiative."

Additionally, says Varachia, the company decided to address the Nigerian market with the opening of an Intergraph office late last year.

"We have always steered clear of Nigeria despite the market enthusiasm for the region. However, our acquisition of Premium Ideas bought with it a Nigerian presence, which we were able to bring to profitability in a very short space of time. That office has a strong management team which understands the environment and how to work it. We sought to capitalise on this team and add another office," he explained.

Varachia said the business continues to look at acquisitions that "fill the gaps". The company is particularly interested in opportunities in East Africa and the sub-continent, particularly India.

These acquisitions would be settled with cash and not the issue of shares, Varachia assured analysts.