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JSC - Jasco - Unaudited Results For The Six Months Ended 31 August 2007
Jasco Electronics Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1987/003293/06
Share code: JSC & ISIN: ZAE000003794
("Jasco" or "Company" or "Group")
Unaudited results for the six months ended 31 August 2007
- Revenue up 42%
- Earnings per share up 40%
- Reduction in working capital days to 22
Commentary
Introduction
The group celebrates its 20th anniversary as a listed company with another
successful performance for the half-year ended 31 August 2007. Earnings per
share (EPS) for the six months increased by 40% to 16,9 cents per share (2006:
12,1 cents per share). This follows the solid performances for the previous two
full financial years. There were no headline earnings adjustments during this
period or the corresponding period last year. Headline earnings per share
therefore also increased by 40% to 16,9 cents per share (2006:12,1 cents per
share). These results are unaudited and in line with the trading update issued
on 17 September 2007.
Results
Income Statement
The first six months of 2007 saw robust growth in revenue of 42% to R252,9
million (2006: R178,1 million). In line with the group`s emphasis on organic
growth, 28% of the growth came from volume increases in the existing businesses,
whilst 8% was accounted for by the group`s three new businesses, T-Components,
RapidCloud and Tasslelane Services. The remaining 6% came from an improvement in
selling prices, continuing the trend of strong volume growth established over
the previous two financial years.
Operating profit increased by 24% to R16,2 million (2006: R13,0 million). Net
profit before taxation grew by 35% to R17,3 million (2006: R12,8 million). This
was the result of a solid performance by the group`s JV, WebbLeBLANC, where the
share of the after tax profits increased to R0,8 million (2006: R0 million), as
well as the reversal of net group interest from a cost of R0,2 million to an
income of R0,4 million.
The group`s calculated tax rate was maintained at 34,7%, which is the average
taxation rate expected for the full year. This rate included STC of 12,5% on the
dividend relating to the prior year, paid during this period, and also took into
account the estimation of non-tax deductible expenses.
Breakdown of Operating Results
The operating profit growth of 24% was achieved after the impact of once-off
expenses of R1,0 million in the Domestic Products division. These included the
expansion of the pool business` distribution network and a reversal of prior
year income following a change in the revenue accounting.
Against the strong growth in revenues, operating margins before interest reduced
to 6,7% (2006: 7,3%).
Margins were affected by the increased contribution to revenue from the two new
telecommunications businesses (RapidCloud and Tasslelane Services), which was
not yet supported by profits, and the once-off expenses outlined above.
Excluding these factors, like-for-like margins increased to 7.6% (Aug 2006:
7.3%)
The elimination of these once-off expenses, the contribution to profits by the
new businesses in the Telecommunications division and a further increase in
selling prices to counter increasing commodity prices will improve the operating
margins during the second half of the year.
Cash Flow and Balance Sheet
Cash generated from operations before working capital increased by 35% to R18,9
million (2006: R14,0 million). Although the substantial increase in revenue
necessitated utilisation of cash, the management of working capital remained a
focus. The group was able to further reduce the average net working capital days
from 29 to 22 at 31 August 2007. The improvement in working capital ratio over
the last two years is most satisfying and is comfortably within the target of 30
days going forward.
After payment of dividends (R9,1 million), taxation (R3,6 million) and the
investment in fixed assets and investments (R6,8 million) cash on hand decreased
to R19,6 million (28 February 2007: R30,1 million).
The acquisition of RapidCloud resulted in an increase in intangibles to R45,4
million (2006: R36,6 million). The full purchase price, limited to a maximum of
R10 million depending on the achievement of performance objectives, is due in
March 2009. A corresponding interest-bearing liability has been raised. Should
the performance objectives not be achieved, goodwill and the interest-bearing
liabilities will be adjusted accordingly.
Basis of preparation
The abridged financial statements have been prepared in terms of IFRS and are
compliant with IAS 34 - Interim Financial Reporting.
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
only, as disclosed in the segmental report. In the period under review, revenue
from operating divisions was R250,6 million and operating profit R25,9 million.
This includes after tax profit from the WebbLeBLANC JV.
Telecommunications
The Telecommunications division is the largest division in the group with a 58%
contribution to revenue from operating divisions (2006: 56%).
This division provides a wide range of solutions, products and services to the
access networks of both fixed line and wireless telecommunications network
operators through six independent operations: Webb Industries, Tasslelane, which
includes Telesciences, Tasslelane Technologies, Tasslelane Services and
RapidCloud, and the group`s share in the WebbLeBLANC joint venture. During the
period under review, Jasco increased its product offering in this field through
the acquisition of RapidCloud Technologies, which specialises in wireless
broadband solutions. The group also started Tasslelane Services, which offers
technical, installation and maintenance services to the industry.
Telecommunications revenue increased by 46% to R144,5 million (2006: R98,7
million), whilst operating profit grew by 40% to R18,9 million (2006: 13,6
million), contributing 73% (2006: 66%) to operating profit from the divisions.
The group benefited from strong growth in GSM roll-outs into Africa, whilst
revenue in the Professional Mobile Radio sector also increased. Revenue and
profits in the fixed line sector remained stable. The operating margin decreased
slightly to 13,1% (2006: 13,7%) due to a shift in mix from the higher-margin
fixed line operation to the lower-margin traditional wireless business and the
increased contribution to revenue from the new businesses, as explained above.
Domestic Products
The group`s Domestic Products division, previously referred to as Manufacturing,
consists of two operations, Special Cables and T-Components. The acquisition of
T-Components was effective 1 July 2006.
The division specialises in electrical and electronic components and sub-
assemblies for the domestic industry. Jasco continues to provide these products
into the large domestic appliances industry for products such as stoves and
fridges and the automotive and leisure industry. The group is now also entering
the smaller appliances industry with products from T-Components. The leisure
business includes mainly swimming pool accessories.
Domestic Products` revenue increased by 34% to R70,5 million (2006: R52,7
million), which now represents 28% (2006: 30%) of revenue from operating
divisions. The continued growth in this division resulted from the increase in
product lines, new customers and the inclusion of the T-Components business
unit`s results for the full period. Organic growth, excluding T-Components,
increased by 23%.
Although revenue increased strongly, operating profit decreased by 3% to R5,7
million (2006: R5,9 million). This represented 22% (2006: 29%) of operating
profit from divisions. The decrease was temporary and due to the once-off
expenses in the pool business, as described above. Operating margins also came
under pressure, as the division absorbed the increase in raw material costs
during the first half of the year. However, product selling prices were
increased during August 2007 and the group expects to see an improvement in the
margins going forward.
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.
As reported in the group`s year-end results, this division requires a steady
flow of base income to cover the overheads of the infrastructure. Large projects
over and above the base income ensure profitability.
The restructuring of the division following the poor results last year is
starting to bear fruit. Although the group has not executed any significant
projects during the first six months of this year, it was able to build a steady
income base that ensured a profit for the period. In addition, this division has
secured a number of significant project orders for execution during the next 18
months.
Security revenue increased by 41% to R35,7 million (2006: R25,4 million) and the
contribution to revenue from operating divisions remained around 14%. Operating
profit increased to R1,3 million, 30% up on the R1 million reported for the
corresponding period last year but, more significantly, it showed a turnaround
from the loss incurred during the second half last year. The increase in costs
incurred to bolster the infrastructure in this division and lack of large
projects resulted in a drop in margins to 3,7% (2006: 4,0%).
Prospects
Jasco`s strategy to enlarge the group through both organic growth and strategic
acquisitions remains in place. The group recognises that it is essential to
build critical mass. Whilst it is proving difficult to find appropriate large-
scale acquisitions, Jasco nevertheless acquired RapidCloud and started a new
service business, in which the group owns 72%, during the period under review.
Both of these business units operate in the Telecommunications sector and
enhance Jasco`s product offering. Jasco is therefore still committed to a
responsible acquisition strategy that will lead to long-term growth in
shareholder value. The group has no gearing, which places it in a solid position
to capitalise on relevant market opportunities as they arise.
Going forward, Jasco expects expenditure in the wireless telecommunications
sector to continue in light of the drive by government to liberalise this sector
in South Africa, whilst the roll out of new GSM networks on the African
continent also continues to provide strong volume growth opportunities.
Expenditure in the fixed line arena is expected to remain flat or even decrease,
but the increase in wireless products and services through the new businesses
will compensate for any slowdown in this area.
Although the margins in Domestic Products have come under pressure, the group
has not seen a decline in the demand for components from manufacturers of
domestic appliances and automotive products in the local market, evidenced by
the 34% growth in revenue. During the period under review, the integration of
the T-Components` factory was completed and the group expects the contribution
from this acquisition to further boost profitability and to assist in the
improvement of the overall margins during the second half of the year.
As mentioned above, the group has secured large Security projects and contracts
from existing and new customers for execution during the next 18 months. The
group estimates the value of these contracts to be in excess of R50 million.
Together with the base income, this bodes well for the full recovery of this
division during the second half of the year.
In the absence of any unforeseen circumstances, management therefore expects
further group earnings growth during the second half of the year.
Dividends are paid annually.
For and on behalf of the Board
Dr ATM Mokgokong MH Lotz WA Prinsloo
(Non-Executive (Chief Executive (Financial Director)
Chairperson) Officer)
4 October 2007
Directors and Secretary
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), MW Lekhesa (Company Secretary)
#(Zimbabwean)
Registered office Woodmead Park, 8 Saddle Drive, Woodmead 2157
Transfer secretaries Link Market Services SA (Pty) Ltd, 11 Diagonal Street,
Johannesburg 2001
Further details can be found on our website www.jasco.co.za
Summarised consolidated income statements
Unaudited Unaudited
6 months 6 months
ended ended % Audited
31 August 31 August change 28
February
(R`000) Note 2007 2006 2007
Revenue 252 871 178 075 42,0 404 255
Turnover 250 637 176 753 41,8 400 694
Interest 2 234 1 322 3 561
received
Operating 16 159 13 025 24,1 39 588
profit before
interest and
taxation
Interest 2 234 1 322 69,0 3 561
received
Interest paid (1 853) (1 553) 19,3 (3 521)
Share of 807 15 5 280,0 126
income from
joint venture
Net profit 17 347 12 809 35,4 39 754
before
taxation
Taxation (5 739) (4 440) 29,3 (13 570)
Profit for 11 608 8 369 38,7 26 184
the
period/year
Headline 11 608 8 369 38,7 26 184
earnings
Number of (`000) 69 931 69 431 69 931
shares in
issue
Treasury (`000) 1 392 354 1 126
shares
Number of
shares on
which
earnings
per share is (`000) 68 539 69 077 68 805
calculated
Number of
shares on
which diluted
earnings per (`000) 1 101 773 98 962 98 690
share is
calculated
Ratio
analysis
Attributable (R`000) 11 608 8 369 38,7 26 184
earnings
Earnings per (cents) 16,9 12,1 39,8 38,1
share
Diluted (cents) 11,4 8,5 34,9 26,5
earnings per
share
Headline (cents) 16,9 12,1 39,8 38,1
earnings per
share
Diluted (cents) 11,4 8,5 34,9 26,5
headline
earnings per
share
EBITDA 19 620 14 587 34,5 44 125
Net asset (cents) 186,8 157,3 18,8 182,6
value per
share
Net tangible (cents) 120,6 104,4 15,5 129,4
asset value
per share
Dividend per - (cents) -
share interim
final (cents) 13,0
Debt:Equity (%) 7 - 1
Interest (times) - 56,4 (100,0) -
cover
Note: 1. These shares relate to our BEE acquisition of Tasslelane (Pty) Ltd from
Community Investment Holdings (Pty) Ltd and will only be issued in March 2008,
provided certain profit targets have been met.
Summarised consolidated balance sheets
Unaudited Unaudited Audited
31 August 31 August 28 February
(R`000) 2007 2006 2007
ASSETS
Non-current assets 82 061 73 342 72 652
Plant and equipment 26 867 21 622 23 562
Investment in joint venture 6 718 5 786 5 911
Intangibles 45 393 36 570 36 570
Deferred tax asset 3 079 7 964 4 643
Loans 4 1 400 1 966
Current assets 187 713 119 062 144 415
Inventories 60 521 35 009 47 551
Trade and other receivables 107 597 70 965 66 791
Cash and cash equivalents 19 595 13 088 30 073
Total assets 269 774 192 404 217 067
EQUITY AND LIABILITIES
Share capital and reserves 128 065 108 687 125 605
Non-current liabilities 9 089 474 1 429
Interest bearing liabilities 8 790 175 1 130
Non-interest bearing 299 299 299
liabilities
Current liabilities 132 620 83 243 90 033
Interest bearing liabilities - - 443
Non-interest bearing 125 778 73 210 83 307
liabilities
Taxation 6 842 10 033 6 283
Total equity and liabilities 269 774 192 404 217 067
Statements of changes in equity
Unaudited Unaudited
6 months 6 months
ended ended Audited
31 August 31 August 28 February
(R`000) 2007 2006 2007
Opening balance 125 605 106 944 106 944
Issue of share capital - - 1 486
Treasury shares - Share (57) (414) (2 785)
Incentive Trust
Share based payment reserve - - 25
Dividends paid (9 091) (6 212) (6 249)
Profit for the period/year 11 608 8 369 26 184
Closing balance 128 065 108 687 125 605
Summarised consolidated cash flow statements
Unaudited Unaudited
6 months 6 months
ended ended Audited
31 August 31 August 28 February
(R`000) 2007 2006 2007
Cash flow from operations 18 914 14 011 43 458
before working capital
changes
Working capital changes (11 766) 790 3 788
Net financing (costs)/income 381 (231) 40
Net taxation paid (3 616) (943) (10 503)
Dividends paid (9 073) (6 198) (6 249)
Cash flow from operating (5 160) 7 429 30 534
activities
Cash flow from investing (6 832) (7 586) (13 729)
activities
Cash flow from financing 1 514 (1 436) (1 367)
activities
(Decrease)/increase in cash (10 478) (1 593) 15 438
resources
Summarised segmental reports
for the six months ended 31 August 2007, 31 August 2006, and the
year ended 28 February 2007
Sub total
(R`000) Domestic operating
31 August Telecoms products Security divisions Other Total
2007
(Unaudited)
Revenue 144 464 70 487 35 686 250 637 2 234 252 871
Operating 18 920 5 667 1 319 25 906 (8 940) 16 966
profit*
Domestic
Sub total
(R`000) operating
31 August Telecoms Products Security divisions Other Total
2006
(Unaudited)
Revenue 98 692 52 653 25 408 176 753 1 322 178 075
Operating 13 567 5 862 1 017 20 446 (7 406) 13 040
profit*
Sub total
(R`000) Domestic operating
28 February Telecoms Products Security divisions Other Total
2007
(Audited)
Revenue 235 669 114 859 51 522 402 050 2 205 404 255
Operating 39 911 13 117 142 53 170 (13 39 714
profit* 456)
* The divisional operating profit includes the income from the joint
venture, but excludes interest paid or received and is stated before
making adjustments for inter-group interest and administration fees.
Date: 04/10/2007 09:00:03 Produced by the JSE SENS Department.
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