| Thu 8 May 2008, 8:00 | | JSC - Jasco Electronics Holdings Limited - Reviewe |
|
JSC
JSC
JSC - Jasco Electronics Holdings Limited - Reviewed results for the year
ended 29 February 2008
JASCO ELECTRONICS HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1987/003293/06
Share code: JSC & ISIN: ZAE000003794
Reviewed results for the year ended 29 February 2008
28% increase in revenue
Earnings per share up 29%
Cash generated (before working capital) increased by 28%
Increase in dividend to 16 cents
Introduction
The directors are pleased to report another successful year for Jasco
Electronics Holdings Limited and its subsidiaries ("the group" or "Jasco").
Earnings per share (EPS) for the year increased by 29% to 49,0 cents per
share (2007: 38,1 cents per share). As there were no material headline
earnings adjustments during this year or last year, headline earnings per
share therefore also increased by 29% to 49,0 cents per share (2007: 38,1
cents per share). These results are in line with the trading update issued
on 31 March 2008.
The year to 29 February 2008 also marked the finalisation of the Black
Economic Empowerment (BEE) transaction entered into on 1 March 2003. In
terms of this agreement, Jasco issued 29,9 million redeemable preference
shares to Community Investment Holdings (Pty) Ltd (CIH), its BEE partner.
The number of ordinary shares to be issued to CIH was calculated in terms of
a predetermined profit formula in line with the Jasco earnings performance
for the five years ended 29 February 2008. These shares will be redeemed
during May 2008 and approximately 17,2 million ordinary shares will be
issued to CIH in lieu of the redeemed preference shares, representing
approximately 57% of the preference shares. This will increase CIH`s
shareholding in Jasco to approximately 47%.
Results
Income Statement
Revenue for the year under review increased by 28% to R519,2 million (2007:
R404,3 million), following on the 28% annual compounded growth rate for the
previous two years. The growth in the revenue was due to a 12% contribution
from the group`s three new businesses, T-Components, RapidCloud and
Tasslelane Services, whilst the remaining 16% came from organic growth in
our existing businesses.
Operating profit increased by 25% to R49,5 million (2007: R39,6 million),
whilst net profit before taxation grew by 25% to R49,7 million (2007: R39,8
million). The profit before tax includes the equity-accounted share of the
group`s joint venture (JV), WebbLeBLANC, where the after tax profits
increased to R1,1 million (2007: R0,1 million). It also includes interest
paid of R0,9 million (2007: Rnil). A large portion of the interest charge is
inputed and therefore does not represent actual interest payments made to
financiers.
The group`s calculated tax rate reduced from 34,7% reported last year to
32,8% this year. This rate included STC on the dividend relating to the
prior year, paid during this year, and also took into account the estimation
of non-tax deductible expenses. The group`s assessed loss has now been
utilised in full.
Cash Flow
Cash reserves increased by 29% to R38,8 million (R30,1 million) for the year
under review after the payment of a dividend of R8,9 million, an investment
in RapidCloud of R2,9 million and an investment of R9,5 million in fixed
assets to improve and expand our manufacturing capacity, the majority being
in the Domestic Products division. Cash generated from operations before
working capital increased by 28% to R55,4 million (2007: R43,5 million).
Although the increase in revenue necessitated the utilisation of cash, we
were able to further reduce the average net working capital days from 30 to
24 at 29 February 2008. Management of our cash resources remains a focus
area and the improvement in the working capital ratio over the last three
years is a result of this. The current ratio is well within our target of 30
days going forward.
Goodwill
The acquisition of RapidCloud resulted in an increase in intangibles to
R45,4 million (2007: R36,6 million). Subsequent to the year end, the full
purchase price was renegotiated at R9,6 million (compared to a possible
maximum of R10 million) and the corresponding interest-bearing liability
that was raised during the year was settled in cash.
Basis of preparation
The abridged financial statements have been prepared in terms of IFRS and
IRS 34-Interim Financial Reporting applicable at 29 February 2008.
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 year
under review, revenue from operating divisions was R514,6 million (2007:
R402,1 million). Operating profit, which includes the group`s share of the
after tax profit from the WebbLeBLANC JV, amounted to R65,8 million (2007:
R53,2 million).
Telecommunications
Although Telecommunications remains the largest division in the group, its
contribution to revenue decreased to 54% (2007: 59%) in line with our
strategy to generate revenue from the three divisions to the ratio of
50:25:25.
This division provides a wide range of solutions, products and services to
the access networks of both fixed line and wireless telecommunications
network operators on the African continent.
Telecommunications revenue increased by 19% and operating profit increased
by 3,9% contributing 63% (2007: 75%) to operating profit from the divisions.
During 2007, revenue from fixed line operators contributed almost 60% to
Telecommunications revenue. During this year, the fixed line contribution
reduced to 35%. Although the effect of this drop in fixed line operator
spend, which resulted in a 30% drop in Jasco`s fixed line volumes, affected
margins, the impact was buffered by growth in new wireless broadband
solutions, again proving the resilience of the group`s diversification
strategy. Margins in the Telecommunications division therefore decreased
from last year`s very high base of 16,9% in 2007 to a still healthy 14,8%
this year, well above our internal targets. Margins were further affected by
strong growth in lower-margin GSM roll-outs into Africa.
Domestic Products
Domestic Products manufactures and assembles electrical and electronic
components and sub-assemblies for the domestic industry.
Domestic Products` revenue increased by 22% representing 27% (2007: 29%) 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 recently acquired T-Components business unit`s results for the full
year.
Operating profit increased by 23%. Operating profit represented 24% (2007:
25%) of operating profit from the divisions for the full year. The second
half of the year showed an improvement in margins due to an increase in
selling prices during August 2007, maintaining the operating margin at 11,5%
(2007 11,4%) under very trying trading conditions.
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.
We are pleased to report that the division was able to deliver on securing
significant projects for execution and that the restructuring and efforts
during the last 18 months resulted in a major turnaround in profits for the
second half of the year under review.
Revenue increased by 83% to R94,3 million, increasing the contribution to
revenue from operating divisions to 18% (2007: 13%). Operating profit
increased to R8,3 million from the R0,1 million reported last year and R1,3
million reported for the first six months of the year. As a result, the
contribution to operating profit from operating divisions increased to 13%
(2007: nil) and an operating margin of 8,8% (2007: 0,3%) was recorded.
Corporate transactions
Details of transactions
During the last three years the group delivered on its organic growth
strategy. As promised, Jasco also aimed to significantly bolster the group
through acquisitive growth.
In line with this strategy, the group announced during April 2008 that it
acquired a 34% stake in South African cable group, Malesela Taihan Electric
Cable (Pty)?Limited (M-TEC), for R214,1 million and that JSE-listed BEE
investment group AfroCentric Investment Corporation Limited (AfroCentric)
acquired a 34,9% stake in Jasco for between R98,4 million and R99,0 million.
The summarised steps of the transaction are:
1. Jasco acquires current BEE shareholder CIH`s 34% economic stake in M-
TEC
2. AfroCentric acquires 34,9% in Jasco from CIH
3. CIH acquires 34,7% in AfroCentric and retains 24% direct shareholding
in Jasco
4. AfroCentric subscribes for preference shares in the Jasco group to fund
the transaction
For further information, we refer readers to the announcements on SENS on 3
April 2008 and the press on 4 April 2008 as well as the financial effects
published on SENS on 25 April 2008 and the press on 29 April 2008.
Benefits of transactions
The introduction of M-TEC and AfrCentric has the following benefits to
Jasco:
- It increases the group`s profitability
- Converts Jasco into a black owned entity, compared to a black
controlled entity
- Further diversifies Jasco`s business in the electrical and electronics
sector
- Increases the group`s access to the lucrative infrastructure spend in
South Africa and Africa
- The introduction of AfroCentric as a major shareholder allows Jasco to
continue its established long term relationship with CIH, while
allowing access to AfroCentric`s intellectual capital. As AfroCentric
will grant Jasco a pre-emptive right to all opportunities in its
current field of operations, we believe this partnership will open new
doors for Jasco going forward
The transaction is subject to certain suspensive conditions, including the
approval of current Jasco shareholders. A detailed circular was posted to
shareholders on 3 May 2008, convening a general meeting of shareholders to
be held on 26 May 2008.
Prospects
Jasco expects expenditure by operators and service providers in the
telecommunications sector to continue. The introduction of broadband
wireless products and solutions allows operators to offer alternative
broadband services to its existing customer base by utilising their existing
network infrastructure, as well as access to new customers who have not had
access to broadband services before. New GSM network roll outs on the
African continent also continue to provide volume growth opportunities,
albeit this business is at lower margins compared to the hi-end solution
business in fixed line. Going forward, expenditure by traditional fixed line
operators is expected to improve as they move towards a network offering
broadband wireless capacity and services.
The Domestic Products division operates in a sector of the economy that is
affected by continued commodity price increases, higher interest rates and
the negative impact of the electricity concerns in the country. To counter
these factors, we continually look at increasing our product offering and
value added services to a broader base of customers, but expect the
performance of this division to remain flat during the next financial year.
The Security division should benefit from the need to improve the general
security position in South Africa, such as for the 2010 FIFA World Cup. The
Security division has already benefited from a number of material tenders
from Transtel, the Bisho Correctional Centre for minors and the Johannesburg
Metropolitan Council for execution during the next 12 to 18 months. The
group estimates the value of these contracts to be in excess of R100
million. Together with increased expenditure by the private sector to
improve security, the group is well placed for continued growth in revenue
and profitability in this division.
The proposed acquisition of an interest in M-TEC will allow Jasco entry and
exposure to the very lucrative cable market in South Africa. It also allows
Jasco to increasingly benefit from the current and expected infrastructure
spend in South Africa and on the rest of the African continent. Some of the
specific prospects are shown below:
- M-TEC was recently awarded a five-year contract by Eskom to supply
aluminium overhead conductors. The minimum take-off requirement is
valued at approximately R500 million per annum
- M-TEC has also secured 50% of the new Neotel fibre supply contract
- To date, M-TEC has supplied only fibre optic cable to Telkom, but with
the recently commissioned copper telecommunications cable plant, M-TEC
will now also be in a position to supply this product to Telkom and
other customers
- M-TEC has a patented overhead copper contact wire used by Spoornet in
their transport network. The upgrading and expansion of the railway
network in South Africa in the near future will therefore benefit M-TEC
- M-TEC is currently the only local manufacturer of optical ground power
wire (OPGW). This cable is used as the earthing conductor on hi-voltage
power transmission lines, whilst it also offers communications
capabilities as it incorporates a fibre optic component
Furthermore, Jasco will take advantage of the opportunity to sell the
existing products it supplies and/or manufactures to the rest of M-TEC`s
customers. Certain benefits are also expected from the supply of cable by M-
TEC to the business units in Jasco that manufacture/supply related
electrical products and to Jasco`s current customers.
Excluding the effects of any unforeseen circumstances, management therefore
expects earnings per share to continue to grow, notwithstanding the proposed
increase in the number of shares issued through the transactions.
Dividends
In view of the sound financial position of Jasco, the directors have
resolved to increase this year`s annual dividend. The final dividend (No.
17) of 16,0 cents per share represents an increase of 23% 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, 23 May 2008
Shares to commence trading (ex Monday, 26 May 2008
dividend)
Record date Friday, 30 May 2008
Payment date Monday, 2 June 2008
Shares may not be de-materialised or re-materialised between Monday, 26 May
2008 and Friday, 30 May 2008, both dates inclusive.
For and on behalf of the board
Dr ATM Mokgokong (Non-executive Chairperson)
MH Lotz (Chief Executive Officer)
WA Prinsloo (Financial Director)
7 May 2008
Summarised consolidated income statements
Reviewed Audited
29 February 28 February Change
(R`000) Note 2008 2007 %
Revenue 519 161 404 255 28,4
Turnover 513 571 400 694
Interest received 5 589 3 561
Operating profit before 49 488 39 588 24,8
interest and taxation
Interest received 5 589 3 561
Interest paid (6 527) (3 521)
Profit before taxation and 48 550 39 628 22,3
share of income from joint
venture
Share of income from joint 1 136 126
venture
Profit before taxation 49 686 39 754 24,8
Taxation (16 201) (13 570)
Profit for the year 33 485 26 184 27,9
Reconciliation of headline
earnings
Net earnings attributable 33 485 26 184 27,9
to ordinary shareholders
Headline earnings 17 -
adjustments
-?loss on disposal of 16 -
fixed assets
-?CGT on disposal of fixed 1 -
assets
Headline earnings 33 502 26 184 27,9
Number of shares in issue 69 931 69 931
(`000)
Treasury shares (`000) 1 527 1 126
Number of shares on which
earnings
per share is calculated 68 404 68 805
(`000)
Number of shares on which
diluted
earnings per share is 1, 2 90 558 98 690
calculated (`000)
Ratio analysis
Attributable earnings 33 485 26 184
Earnings per share (cents) 49,0 38,1 28,7
Diluted earnings per share 37,0 26,5 39,4
(cents)
Headline earnings per 49,0 38,1 28,7
share (cents)
Diluted headline earnings 37,0 26,5 39,4
per share (cents)
EBITDA 56 125 44 125 27,0
Net asset value per share 221,0 182,6 21,1
(cents)
Net tangible asset value 154,6 129,4 19,4
per share (cents)
Dividend per share - final 16,0 13,0
(cents)
Interest cover (times) 53,9 -
Note: 1. 17 162 969 (2007: 29 884 633) of these shares relate to our BEE
acquisition of Tasslelane Technologies (Pty) Ltd from CIH on 1 March 2003
and will be issued in May 2008, based on the extent of profit targets having
been met.
Note: 2. In terms of the Jasco Share Option Scheme as set out in the
circular dated 31 May 2007, an additional
4 990 786 shares can be issued to the CEO provided certain profit targets
are met.
Summarised consolidated balance sheets
Reviewed Audited
29 February 28 February
(R`000) 2008 2007
ASSETS
Non-current assets 86 904 72 652
Plant and equipment 27 414 23 562
Investment in joint venture 6 931 5 911
Intangibles 45 448 36 570
Net deferred tax asset 5 205 4 644
Other financial assets 1 906 1 965
Current assets 189 110 144 415
Inventories 51 080 47 551
Trade and other receivables 99 205 66 791
Cash and cash equivalents 38 825 30 073
Total assets 276 014 217 067
EQUITY AND LIABILITIES
Share capital and reserves 151 178 125 605
Non-current liabilities 3 183 1 429
Interest bearing liabilities 2 884 1 130
Non-interest bearing liabilities 299 299
Current liabilities 121 653 90 033
Interest bearing liabilities 8 053 443
Non-interest bearing liabilities 104 213 83 307
Taxation liability 9 387 6 283
TOTAL EQUITY AND LIABILITIES 276 014 217 067
Contingent liability
During the year under review, SARS revised its assessment of income taxation
for Jasco Electronics Holdings Limited for the years ended 29 February 2004
and 28 February 2005 by R0,5 million and R1,0 million respectively. Based on
professional advice received from two independent, non-related parties, the
directors believe that the reassessments are invalid, and the possibility of
an outflow of economic resources is so remote that a provision is not deemed
necessary for the reassessments.
Statements of changes in equity
Reviewed Audited
29 February 28 February
(R`000) 2008 2007
Opening balance 125 605 106 944
Issue of share capital - 1 486
Treasury shares - Share Incentive Trust (146) (2 785)
Share-based payment reserve 1 146 25
Profit for the year 33 485 26 184
Dividends paid (8 912) (6 249)
Closing balance 151 178 125 605
Summarised consolidated cash flow statements
Reviewed Audited
29 February 28 February
(R`000) 2008 2007
Cash generated from operations before 55 441 43 458
working capital changes
Working capital changes (13 300) 3 788
Net financing (costs)/income (169) 40
Net taxation paid (13 659) (10 503)
Dividends paid (8 912) (6 249)
Cash flow from operating activities 19 401 30 534
Cash flow from investing activities (12 333) (13 728)
Cash flow from financing activities 1 608 (1 368)
Increase in cash resources 8 676 15 438
Summarised segmental reports
Telecom- Domestic Sub-total
munica- Products Secu- Oper-
tions rity ating
(R`000) division division Divi- divisions Other Total
sion
29 February
2008
(Reviewed)
Revenue 280 337 139 935 94 313 514 585 4 576 519 161
Operating 41 453 16 081 8 254 65 788 (15 164) 50 624
profit/
(loss)*
28 February
2007
(Audited)
Revenue 235 669 114 859 51 522 402 050 2 205 404 255
Operating 39 911 13 117 142 53 170 (13 456) 39 714
profit/
(loss)*
* Operating profit of the operating divisions includes the equity accounted
income from the joint venture, excludes interest paid or received and is
stated before making adjustments for inter-group administration fees.
Review opinion
The results have been reviewed by the group`s independent auditors Ernst
&?Young Inc. A copy of their unmodified review opinion is available for
inspection at the group`s registered office.
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), MW Lekhesa (Company Secretary)
+(Zimbabwean)
Registered office: Woodmead Park, 8 Saddle Drive, Woodmead 2157
Transfer secretaries: Link Market Services South Africa (Pty) Ltd, 11
Diagonal Street, Johannesburg 2001
Corporate sponsor: PSG Capital (Pty)?Ltd
Further details can be found on our website www.jasco.co.za
INCORPORATING: Webb Industries WebbLeBLANC Telesciences Tasslelane
Technologies Tasslelane Services RapidCloud Technology Special Cables T-
Components Multivid Scafell
Date: 08/05/2008 08:00:11 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
