| Wed 25 Apr 2007, 8:00 | | JSC - Jasco - Reviewed Results For The Year Ended |
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JSC - Jasco - Reviewed Results For The Year Ended 28 February 2007
Jasco Electronics Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1987/003293/06)
Share code: JSC & ISIN: ZAE000003794
(`Jasco` or `the Group`)
Reviewed results for the year ended 28 February 2007
* Revenue up 21%
* Earnings per share up 45%
* Cash generated up 102%
* 44% increase in dividend to 13 cents
Introduction
The Jasco board has pleasure in presenting the reviewed results for the year
ended 28 February 2007. Earnings per share increased by 45,4% to 38,1 cents
per share compared to the 26,2 cents per share reported last year. This
improvement was mainly supported by a robust performance from the
Telecommunications division. Disciplined working capital management saw cash
on hand growing to R30,1 million at year end, compared to R14,7 million at 28
February 2006.
Results
Revenue increased by 20,9% to R404,3 million (2006: R334,4 million). The 2007
revenue excludes the revenue from the group`s Mast & Towers business unit,
which now forms part of the WebbLeBLANC joint venture and is equity accounted.
Like-for-like growth in revenue was therefore 27,8%. The strong top-line
growth underlines the success of the organic growth strategy implemented by
the group a few years ago, with compounded growth over the last two years of
26,5%. As in the previous year, the majority of the growth came from an
increase in volumes, with only approximately 6% of this growth attributable to
an improvement in selling prices.
The increased contribution from the higher margin Telecommunications division
and the overall increase in volumes resulted in an improvement in operating
margin before interest from 8,5% to 9,9%, falling just shy of the group`s
target of 10%. However, these results include a once-off expense of R1,4
million in the first half spent on a detailed due diligence process relating
to the possible acquisition of a substantial business that would have almost
doubled Jasco`s size, converted the group into an unconditionally black owned
entity and broadened its customer base and product range. Following the
investigation, the Jasco board found that the value/reward ratio was not
acceptable and that the transaction would not be in the best interest of
shareholders. The operating margin, excluding this expenditure, exceeds the
10% target.
Net profit before interest grew by 40,9%, whilst net profit before taxation
grew by 45,5% to R39,8 million (2006: R27,3 million), assisted by the
elimination of interest paid. After providing for taxation and income from the
WebbLeBLANC joint venture, earnings per share increased by 45,4% to 38,1 cents
per share (2006: 26,2 cents per share).
The group`s calculated tax rate was 34,2%, slightly better than the
anticipated rate used at the interim stage of 34,7%. This rate includes
permanent differences, STC of 12,5% paid on the dividend relating to the prior
year and the once-off acquisition expense referred to above.
Headline earnings per share increased by 37,5% to 38,1 cents per share (2006:
27,7 cents per share). There were no headline earnings adjustments this year,
compared to the R1,0 million adjustment last year.
The higher levels of profitability improved the net tangible asset value per
share to 129,4 cents, 27,5% up on the 101,5 cents reported last year.
Jasco continued its high levels of cash generation from profits, ending the
year with a cash balance of R30,1 million at28 February 2007. During the year
under review, the group generated cash of R47,2 million from operations (2006:
R23,4 million), amounting to 119,2% (2006: 83,2%) of operating profit before
interest. The strong cash generation is also reflected in the decrease in
average net working capital days to 29 days (2006: 37 days).
These improvements resulted from a focused drive to improve working capital
levels at the end of last year. The effort was further assisted by the
exclusion of the Mast & Towers business unit, now equity accounted, from this
year`s result. These low levels allowed management to revise their target net
working capital days from 45 to an upper limit of 35, which the group believes
is sustainable through continued management effort.
Basis of preparation
The abridged annual financial statements, for the year ended 28 February 2007,
have been prepared in accordance with International Financial Reporting
Standards (`IFRS`) and the Companies Act of South Africa. The accounting
policies applied are consistent with those of the previous financial year.
Operational review
The divisions` contribution to group revenue and operating profit is
calculated as a percentage of the revenue and operating profit from operating
divisions. In the year under review, revenue from operating divisions was
R402,1 million and operating profit R53,0 million as per the segmental report.
Telecommunications
Strong performances from all three business units in this division resulted in
an increase in the Telecommunications division`s contribution to both group
revenue and profit. This division contributed 58,6% (2006: 57,7%) to group
revenue, whilst the contribution to operating profit increased to 75,0% (2006:
60,3%).
The division focuses on providing products, solutions and services to the
access networks of both fixed line and wireless telecommunications network
operators through a combination of in-house products and strategic products
sourced on an exclusive basis from leading overseas suppliers.
The division consists of three independent operations: Webb Industries,
Tasslelane and Telesciences. Over the last few years Jasco deliberately
positioned these businesses to benefit from the current buoyant market in
telecommunications, GSM and private mobile radio (`PMR`) by increasing the
product offering and supplying technical expertise to customers. In the year
under review, the division benefited from the demand for broadband capacity in
South Africa, the need to increase the tele-density in Africa, mainly through
GSM roll-outs, and the continued demand for security services, supporting the
PMR business.
These improvements resulted in revenue increasing by 22,8% to R235,7 million
(2006: R192,0 million), whilst operating profit grew strongly by 69,8% to
R39,8 million (2006: R23,4 million). The improvement in the operating margin
from 12,2% to 16,9% is due to the elimination of the losses incurred by the
Mast & Towers business unit during 2006, a larger contribution from the higher-
margin fixed line operations and an overall increase in volumes. The merger of
the group`s Mast & Towers business unit with that of LeBLANC last year proved
successful, with this business producing a profit in its first year of
operation. The after-tax portion of this profit, disclosed as `Share of income
from associate`, was R126 000.
Subsequent to the year end, with effect from 1 March 2007, Jasco entered into
a partnership forming a sister-company to Tasslelane, Tasslelane Services
(Pty) Ltd, in which the group holds 72% of the shares. This business
supplements Jasco`s product range by allowing the group to offer installation
and maintenance services in addition to the supply of products and solutions.
This business will also benefit from the changing environment where operators
are outsourcing more of their technical requirements. With effect from 1 April
2007, the group also acquired the business of RapidCloud Technologies (Pty)
Ltd., which will give Jasco access to the African market and increase its
wireless broadband product range. The much-needed technical and marketing
expertise RapidCloud brings will also allow Jasco to reduce its reliance on
fixed line telecommunications operators.
Manufacturing/Domestic products
The group`s Manufacturing/Domestic Products division consists of two
operations, Special Cables and T Components, a business acquired during the
first half of the year. Both operate from factories in KwaZulu-Natal. Special
Cables specialises in the cutting of wire, the moulding of plastic components
and the assembly of these and other products into a pre-assembled unit for
domestic and automotive products. This division also manufactures a saltwater
pool chlorinator and a range of other pool and garden lights for sale under
the Justchlor brand.
T Components specialises in the pressing of steel and metal components for
application in the electrical sector and the manufacture of a range of
electrical plugs. These products supplement Special Cables` wire products. T
Components was acquired with effect from 1 July 2006. The purchase
consideration was settled in cash. The acquisition of this R17 million annual
turnover business expands Jasco`s customer base, widens its product offering
and will bring a much-needed increase in capacity through more human resources
and additional factory space.
The revenue in the division increased by 33,7% to R114,9 million (2006: R85,9
million) and now represents 28,6% (2006: 25,8%) of revenue from operating
divisions. The increase is attributable to eight months` revenue from T
Components, continued growth due to a healthy economic environment and the
ongoing electrification of previously neglected areas, as well as the increase
in product lines.
Operating profit increased by 12,8% to R13,1 million (2006: R11,6 million),
which represents 24,7% (2006: 29,9%) of operating profit from divisions.
Operating margins increased slightly from the 11,1% reported at the interim
stage, but decreased to 11,4% from 13,5% last year. This decrease in the
margins is due to the combined impact of:
Unexpected high increases in commodity prices such as oil, copper and
titanium. The division was not in a position to pass on the full impact of
these increases as the international prices started to soften towards the end
of the year. However, the prices have recovered again, although to a lesser
extent than before. This will allow for an increase in margins.
Relocating T Components. During the second half of the year, the T Components
factory was moved closer to Special Cables into a larger and more suitable
building, allowing the division better management control and larger capacity.
This resulted in once-off expenses and a short-term negative impact on the
production capacity, which reduced the margins in the T Components business
unit. The group is confident that the margins will improve as production
volumes are increased during the coming year.
The evolution of the production model. In certain areas Jasco used to receive
consignment components, such as lights and terminals, for inclusion into the
assembled units. These items were therefore excluded from revenue and cost. In
an effort to improve the efficiency of supply and increase value-add of the
products for customers, Jasco now purchases these components. As a result,
these now form part of Jasco`s revenue and cost at no mark up, which erodes
margins. However, this leads to an increase in the net profit through the
additional value-add resulting from the assembly of the parts.
Although the impact of the evolution in the production model will continue to
affect margins, the group is confident that the first two factors will be
reversed and that the group should see an increase in margins going forward.
Subsequent to the year end, a competitor in the electrical plug business
closed, which will allow Jasco to increase its market share in this sector.
Furthermore, the division has expanded its range of pool products, with
imported pool pumps and a number of plastic pool products, manufactured in-
house.
Security
The Security division offers electronic security solutions as integrators of
stand-alone and integrated closed circuit television networks (`CCTV`), access
control, and alarm monitoring systems. The division operates as two stand-
alone business units, namely Multivid and Scafell.
The poor performance in the first half continued into the second half and the
division ended the year with a very small profit of R142 000. The traditional
business model applied in this business has been to secure sufficient annuity-
based type income to cover the overheads and to secure a number of larger
projects to provide the profits. During the year under review, this division`s
project business was less than 10% of revenue, limiting profitable trade.
The contribution to revenue from operating divisions decreased from 16,4% to
12,8% as revenue decreased from R54,6 million to R51,5 million this year. The
contribution to operating profit from divisions was down to less than 1%
(2006: 9,8%) and margins decreased from 7,0% to 0,3%.
As reported during the interim stage, the group restructured the management
team and appointed a new CEO. The new CEO focused on working capital
management and administrative controls, restructured the management team and
strengthened the sales and operational teams. These efforts have started to
bear fruit with the securing of a project with a value in excess of R20
million subsequent to the year end.
Jasco is confident that the business will be profitable during this year, as
the annuity base is in place, the management team is incentivised, the
operational structures are in place and project income has been secured.
Prospects
The group`s strategy to grow Jasco both organically and through strategic
acquisitions remains in place. Two small acquisitions were concluded in the
Telecommunications and Manufacturing/Domestic Products divisions. One was
concluded during the year under review and one subsequent to the year end. The
group also entered into a partnership to expand its services in the
telecommunications sector.
Jasco remains committed to implementing a responsible acquisition strategy
that will lead to long-term growth in shareholder value. The group has no
gearing and a positive cash balance, which places it in a solid position to
capitalise on relevant market opportunities as they arise.
Prospects remain positive in the areas in which the group operates. Jasco
expects expenditure in the telecommunications sector to remain strong on the
back of the current liberalisation taking place in South Africa, whilst the
roll-out of new GSM networks on the African continent continues.
The demand for components from manufacturers of domestic appliances and
automotive products in the local market remains at high levels, evidenced by
the growth in Manufacturing/Domestic Products` revenue. This, as well as the
incorporation of T Components, has positioned Jasco well to increase its
market share.
As mentioned above, the group is confident that its focus on improving the
Security division, new management and other efficiency drives will allow this
division to benefit from government`s commitment to infrastructure development
and the growing emphasis on electronic security as a means to curtail crime in
South Africa.
In the absence of any unforeseen circumstances, management therefore expects
further group earnings growth in the next year.
Dividends
In view of the sound financial position of Jasco, the Jasco board has resolved
to increase this year`s annual dividend. The final dividend (No. 16) of 13,0
cents per share represents an increase of 44,4% from the dividend paid last
year. The dividend will, in terms of STRATE, be paid as follows:
Event Date
Last day to trade (cum dividend) Friday, 18 May 2007
Shares to commence trading (ex dividend) Monday, 21 May 2007
Record date Friday, 25 May 2007
Payment date Monday, 28 May 2007
Shares may not be dematerialised or rematerialised between Monday, 21 May 2007
and Friday, 25 May 2007, both dates inclusive.
Directors and secretary
During the year under review, MJ (Joe) Madungandaba resigned as Chief
Executive Officer to take up the position of Non-executive Deputy Chairperson,
whilst MH (Martin) Lotz, previously the Chief Operating Officer, was appointed
as the Chief Executive Officer. WA (Warren) Prinsloo was appointed as
Financial Director, O (Olga) Seiphemo was appointed as Marketing Director and
MW (Motlatsi) Lekhesa was appointed as Company Secretary.
For and on behalf of the board
Dr ATM Mokgokong MH Lotz
(Non-executive Chairperson) (Chief Executive Officer)
WA Prinsloo
(Financial Director)
25 April 2007
Summarised consolidated income statements
Reviewed 28 Audited 28 February Change
February %
(R`000) Note 2007 2006
Revenue 404 255 334 402 20,9
Turnover 400 694 332 169
Interest received 3 561 2 233
Operating profit before 43 149 30 339 42,2
interest paid and
taxation
Interest paid (3 521) (3 025)
Profit before taxation 39 628 27 314 45,1
and share of income
from associate
Share of income from 126 -
associate
Operating profit before 39 754 27 314 45,5
taxation
Taxation (13 570) (9 177)
Profit for the year 26 184 18 137 44,4
Reconciliation of
headline earnings
Net earnings 26 184 18 137 44,4
attributable to
ordinary shareholders
Headline earnings - 1 046
adjustments
- impairment of - 610
goodwill
- reversal of currency - 436
translation reserve
Headline earnings 26 184 19 183 36,5
Number of shares in 69 931 69 431
issue (`000)
Treasury shares (`000) 1 126 119
Number of shares on 68 805 69 312
which earnings per
share is calculated
(`000)
Number of shares on 1 98 690 99 197
which diluted earnings
per share is calculated
(`000)
Ratio analysis
Attributable earnings 26 184 18 137
Earnings per share 38,1 26,2 45,4
(cents)
Diluted earnings per 26,5 18,3
share (cents)
Headline earnings per 38,1 27,7 37,5
share (cents)
Diluted headline 26,5 19,3
earnings per share
(cents)
EBITDA 44 125 33 441
Net asset value per 182,6 154,3
share (cents)
Net tangible asset 129,4 101,5 27,5
value per share (cents)
Dividend per share - 13,0 9,0
final (cents)
Interest cover (times) - 35,5
Note: 1. These shares relate to our BEE acquisition of Tasslelane Technologies
(Pty) Ltd from Community Investment Holdings (Pty) Ltd on 1 March 2003 and
will only be issued in March 2008, provided certain profit targets have been
met.
Summarised consolidated balance sheets
Reviewed Audited
28 February 28 February
(R`000) 2007 2006
ASSETS
Non-current assets 72 652 62 410
Plant and equipment 23 562 17 441
Investment in associate 5 911 -
Intangibles 36 570 36 570
Deferred tax asset 4 644 8 395
Loans 1 965 4
Current assets 144 415 111 753
Inventories 47 551 41 202
Trade and other receivables 66 791 55 871
Cash and cash equivalents 30 073 14 680
Total assets 217 067 174 163
EQUITY AND LIABILITIES
Share capital and reserves 125 605 106 944
Non-current liabilities 1 429 1 497
Interest bearing liabilities 1 130 1 198
Non-interest bearing liabilities 299 299
Current liabilities 90 033 65 722
Interest bearing liabilities 443 341
Non-interest bearing liabilities 89 590 65 381
Total equity and liabilities 217 067 174 163
Statements of changes in equity
Reviewed Audited
28 February 28 February
(R`000) 2007 2006
Opening balance 106 944 92 871
Issue of share capital 1 486 -
Repayment of share premium - (300)
Treasury shares - Share Incentive (2 785) (84)
Trust
Loss on translation of foreign - (6)
subsidiary
Reversal of currency translation - 436
reserve
Share-based payment reserve 25 56
Profit for the year 26 184 18 137
Dividends paid (6 249) (4 166)
Closing balance 125 605 106 944
Summarised consolidated cash flow statements
Reviewed Audited
28 February 28
February
(R`000) 2007 2006
Cash generated from operations 47 246 23 373
Net financing costs 40 (792)
Net taxation paid (10 503) (1 145)
Dividends paid (6 249) (4 166)
Cash flow from operating activities 30 534 17 270
Cash flow from investing activities (13 728) (7 012)
Cash flow from financing activities (1 368) (863)
Increase in cash resources 15 438 9 395
Summarised segmental reports
Telecom- Manu-factu- Security Sub-total
muni- ring/Domestic operating
cations Products
(R`000) division division division divisions Other Total
28
February
2007
(Reviewed)
Revenue 235 669 114 859 51 522 402 050 2 205 404 255
Operating 39 785 13 117 142 53 044 (9 895) 43 149
profit *
Share of 126 - - 126 - 126
income of
associate
28
February
2006
(Audited)
Revenue 191 956 85 925 54 629 332 510 1 892 334 402
Operating 23 436 11 632 3 801 38 869 (8 530) 30 339
profit *
Operating profit of the operating divisions excludes interest paid or received
and is stated before making adjustments for inter-group interest and
administration fees.
Directors: Dr ATM Mokgokong (Chairperson), MJ Madungandaba (Deputy
Chairperson), PS Chapwanya, FE Emary, JC Farrant, Dr JM Matsipa, JA Sherry
(Non-executives), MH Lotz (CEO), WA Prinsloo (Financial Director), O Seiphemo
(Marketing Director)
(Executives) (Zimbabwean) MW Lekhesa (Company Secretary)
Registered office: Woodmead Park, 8 Saddle Drive, Woodmead 2157
Transfer secretaries: Link Market Services South Africa(Pty) Ltd, 11 Diagonal
Street, Johannesburg 2001
Further details can be found on our website www.jasco.co.za
Date: 25/04/2007 08:00:02 Produced by the JSE SENS Department.
