The R373,9-million settlement that JSE-listed Gijima reached with the Department of Home Affairs (DHA) was a difficult business decision, but was more manageable than years of court action, CEO Jonas Bogoshi said on Wednesday.

The information and communications group on Wednesday reported an interim loss of R270-million, and revenue decline of 13,6% to R1,24-billion, with a weak performance from its professional services stemming from the Who Am I Online contract settlement with the DHA.

The settlement included R80-million in future support and maintenance services and all direct costs linked to the settlement.

Bogoshi said the dispute with the DHA had hurt Gijima, but he was confident that the company could now move forward.

“In future, we will overhaul our key processes, such as developing more stringent contracts for our public sector engagement model, and improving our risk management processes,” he noted.

The Who Am I Online project was taken on by Gijima in 2008 to overhaul the department’s information technology infrastructure. Gijima received a letter from the DHA in April last year, in which it declared the contract invalid, reportedly owing to failure to deliver. However, Gijima’s legal team held that the contract was valid and enforceable.

Bogoshi explained at Gijima’s results presentation in Johannesburg that the main issue related to the R2,5-billion budget set by National Treasury, as the company needed more capital to include extra functions on visas and passports.

“At the start of 2010, we realised we wouldn’t be able to deliver on the improved plan, so the DHA searched elsewhere for a simple solution to protect the borders in time for the 2010 FIFA World Cup. Gijima’s infrastructure was not suitably built for the much lower revenue margin,” he said.

Although the dispute and the revenue write-off would hurt Gijima’s financial position and reputation in the short-term, the company would continue to do business with government. A new contract for the Who Am I Online project has already been set up after the settlement, with a new time line of 18 months and a new budget.

“The government is spending more on information technology in the long term than on any other sector, and we would like to maintain good relations. However, we would consider future contracts carefully and improve our risk management, to prevent such disputes in future,” said Bogoshi.

CFO Carlos Ferreira said that Gijima aimed to reorganise its professional services division and create improved agility in its support structure.

“The company’s managed services performed well, with a revenue increase of 15,6% and operating profit up by 13,2%, but the strong performance was curtailed by the professional division’s revenue drop of 39,7% and operating profit decrease of 143,5%, of which the Who Am I Online contract formed part,” he said.

Gijima would also work on improving its reputation and reenergising its employees in the coming year, although the possibility of retrenchments was recognised.

The remnants of the DHA dispute would have repercussions until the end of the year. Dividend payments were suspended for the time being.