Gijima is turning the corner after rough seas – CEO

Gijima is a cautionary tale for all businesses on the danger of having a few big clients that you rely on for major chunks of your revenue. In 2012, Gijima lost two big contracts, one with Absa and the other with the South African Police Service. The loss of these contracts was enough to shift the company from profitable to loss-making, and resulted in a number of changes, including the resignation of CEO Jonas Bogoshi and the induction of new CEO Eileen Wilton. The company is slowly struggling back to profitability, having slashed costs by R22m a month by cutting staff, moving to cheaper premises, renting out some of its office space and various other means. The slog back to profit has been tough, however, and Gijima is still trying to find new contracts to boost revenues which are currently just slightly above operating costs. – FD

GUGULETHU MFUPHI:  Listed ICT service provider Gijima has reported a drop in interim revenue today.  The company says that going forward they are looking to explore new markets.  Joining us now for more is Eileen Wilton.  She is the Chief Executive of Gijima.  Certainly, you've had a challenge-and-a-half since taking on the role as the fulltime CEO.  The turnaround strategy: is it working?

EILEEN WILTON:  Thank you very much for inviting me here today, and absolutely, yes, the turnaround strategy is working.  When we last spoke, I shared that the turnaround strategy had four cornerstones and I'd like to share with you, in addition to the earnings, how we're doing.  The first one obviously, is that we cut costs and we reported today that we have achieved our target, which we set, of R20m per month.  In fact, we achieved that target by November last year.  Currently, we're at R22m per month, so we're very satisfied about the cost savings strategy because it is the result of that, primarily, that has resulted in us reporting today a positive EBITDA of R2.7m.  However, we all know that I can't save the company into a sustainable business, so that was very necessary because we had shrunk as a business and our efforts, in addition to cost savings, are about top-line growth.  In terms of top-line growth, it is true that we are reporting a drop in revenue, and the drop in revenue is predominantly because of the tail ends of the contracts we spoke about beforehand, that had ended.

ALEC HOGG:  Which ones are those?

EILEEN WILTON:  Absa and SAPS, so the Absa and SAPS, and [inaudible 1:43] ending – or exiting – is now fully felt in our figures so now, this is the base we're at.  We know that in terms of the space that we're on a very solid footing.

ALEC HOGG:  Just to give us an understanding, you have revenues now of R740m as against over R900m at the same time last year.

EILEEN WILTON:  That's correct.

ALEC HOGG:  What are your monthly running costs, and what kind of annuity revenue are you getting?

EILEEN WILTON:  Firstly, if I answer the annuity revenue, we earn annuity revenue of R1.2bn p.a. – very solid annuity revenue.  In fact, if we roll forward the annualised annuity revenue with signed contracts – not even the ones where we have options to renew for further years – we have annuity revenue (we use this as a very loose term of order book) of just under R4bn.  We're very, very happy with that and this year, as part of our turnaround we focused on a number of things.  Firstly, in terms of top-line growth, the renewals we had to get…

ALEC HOGG:  It's interesting, but it's a bit confusing.  I'm really trying to get to the nub of the matter.  What is your income on a monthly basis (your annuity income, because that's what you're really about) as against the cost?  You say you reduced costs by another R22m.

EILEEN WILTON:  Our monthly cost base runs at R130m or thereabouts.  I always round figures off, and our revenue is quite close to that.

ALEC HOGG:  Above or below?

EILEEN WILTON:  Just above…just above, at the moment.

ALEC HOGG:  So you are trading slightly profitably.  What's going to make you?  What's going to take you to the next level?  What's going to get Robert his money back, which he's just put in?

EILEEN WILTON:  There are two things.  The first thing in terms of this top-line growth: we obviously had to retain our base.  The second thing is to get the right kind of revenue, so in terms of the turnaround, the turnaround is a three-year process.  Last year was the emergency process.  This year, we're into our first six months of the turnaround and we have to get the right kind of revenue.  In the short term, the way we build up our numbers is to take low margin revenues, which are easy to sell, while we developed strategies for the higher margin revenue.  The higher margin revenue comes predominantly from the annuity revenue, the services revenue, and from the projects revenue.  In our numbers, the projects revenue is slightly behind, but we have very good opportunities that are busy landing across Africa.

ALEC HOGG:  So you're doing a lot of bidding, no doubt, for opportunities at reasonable margins.

EILEEN WILTON:  One hundred percent.

GUGULETHU MFUPHI:  Just on those opportunities, your split…you're looking to have 70 percent in private sector and 30 percent in public.  What was it before?

EILEEN WILTON:  With the last results, we reported 65/35 – 65 percent private sector and 35 percent public sector.  We're roughly still at the same level, but we will continue to work on growing our private sector revenue so that we can actually get the splits correct.

ALEC HOGG:  You mentioned other parts of Africa.  Where in particular?

EILEEN WILTON:  At the moment, we have three ways in which we generate revenue in Africa.  The one way is that we still have a Namibian business.  The Namibian business is doing a little bit sluggishly this year, simply because of their BEE requirements where you need a higher shareholding.  We're busy working on addressing it.  Secondly, we're busy going into Africa (it sounds awful to say this), but the tail end of our customers.  For example, one of our key customers is Total South Africa.  We service them across the SADAC countries and we service them in the local countries.  Thirdly, we take – and this is going to be a big component of new revenue generation in the next couple of months.  I don't have an exact date today, but in the next couple of months, where we take offerings we have here.  For example, everybody talks about Gijima in terms of the solutions we've typically delivered before.  One of them, which is widely talked about, is our Vulindlela Project and the Cadastral Solution: we make that into software in a box, there's a wide need across Africa, we're busy looking for markets, and we have a couple of markets about to land.