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JSC - Jasco Electronics Holdings Limited - Abridged Audited Results
for the Year Ended 30 June 2009 and Notice of Annual General Meeting
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1987/003293/06
Share code: JSC
ISIN: ZAE000003794
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2009 AND NOTICE OF
ANNUAL GENERAL MEETING
Continued growth in revenue and earnings
Strong cash generation from operations
Converted from a black controlled to a black owned entity
INTRODUCTION
Jasco Electronics Holdings Limited ("Jasco" or the "group") has a
diversified portfolio of four divisions operating in the growth
sectors of Telecommunications, Security, Domestic Products and
Electrical. Jasco`s portfolio of businesses distributes, assembles
and/or designs and manufactures electronic and electrical products and
solutions.
RESULTS OVERVIEW
As reported for the 12-month period ended 28 February 2009 - the
second interim period due to the group`s change in year end - Jasco`s
historic businesses continued to show solid growth at both revenue and
operating profit level, with four-year compounded revenue growth of
25%. However, the trading environment deteriorated dramatically from
March 2009 onwards. Despite the fact that Jasco`s results have always
been seasonal (with the quarter from March to May traditionally being
weakest due to a number of public holidays that impact negatively on
operations), the results for the four months to 30 June 2009 were
disappointing.
Financial review
Revenue for the 16 months ended 30 June 2009 increased to R773 million
(12 months to February 2008: R519 million). Operating profit for the
16 months increased to R72 million (February 2008: R51 million) whilst
earnings per share (EPS) and headline earnings per share (HEPS)
decreased to 36,2 cents per share (February 2008: 49,0 cents per
share) and 36,7 cents per share (February 2008: 49,0 cents per share).
The decrease was due to the impact of poor economic and market
conditions, as well as the dilutionary effect of Jasco`s BEE
transaction, which impacted EPS and HEPS. The comparative 2008 EPS and
HEPS were calculated before the issue of 17,2 million new ordinary
shares, issued in terms of Jasco`s BEE transaction concluded with
Community Investment Holdings (Pty) Ltd in March 2003. The impact of
this new issue of shares was to dilute both EPS and HEPS from the 49
cents per share reported for the year ended 29 February 2008 to 39,1
cents per share, which provides a more comparative base.
In an effort to disclose like-for-like numbers, the group has also
prepared unaudited summarised results for the 12-month periods ending
30 June 2008 and 2009. The full summarised unaudited results are
available on the Jasco website at www.jasco.co.za.
Comparative revenue for the 12 months to June 2009 of R600 million
grew by 10,4% from R543 million, whilst operating profit for the same
period declined by 7,8% from R55 million to R51 million, whilst
operating margins declined from 11,5% to 8,5%. This decline confirms
the tougher trading conditions experienced since March 2009.
12 months 12 months
unaudited unaudited
June 2009 June 2008 %
R`000 R`000 change
Revenue 599 763 543 081 10,4
Operating profit before 51 071 55 362 (7,8)
interest and taxation
Cash generated from operations for the 12 months to 30 June 2009
increased by 157,9% to R105 million (June 2008: R40 million).
Following the strong cash generation during this period, average
working capital of 22,4 days for the 16-month period to 30 June 2009
improved further from the 23,2 days at the end of February 2009 and
the 23,9 days at the end of February 2008.
After accounting for financing costs, taxation, two ordinary dividend
payments and the net cash outflow in investing activities, the group
utilised cash of R67 million, resulting in short term borrowings of
R28 million. The debt:equity ratio, including the R100 million
redeemable preference shares issued to finance the acquisition of our
share in M-TEC is 51,0%. Excluding the R100 million, the debt:equity
ratio is 12,3%.
Accounting policies
The abridged consolidated audited financial statements have been
prepared in accordance with the International Financial Reporting
Standards ("IFRS") and the presentation and disclosure requirements of
IAS 34 (Interim Financial Reporting), the Listings Requirements of the
JSE Limited and the Companies Act 61, 1973, as amended. The accounting
policies have been applied consistently by individual group companies
and have been applied consistently to all periods presented in these
abridged consolidated audited financial statements.
Operational review
The market downturn was first felt within the durable goods industry,
a trend which continued to impact on the Domestic Products division
during the second half of this period. The Security division had a
strong period to February, compensating largely for Domestic Products
on turnover and profit. Telecommunications increased its market share
despite a very challenging environment and our associate M-TEC showed
an improvement in contribution during the last four months.
Telecommunications - 53,7% of group revenue
On a 12-month comparison, Telecommunications revenue grew by 6,5% to
R315 million (June 2008: R296 million). Operating profit declined by
8,1% from R47 million to R43 million. Margins remained under pressure
as most operators cut budgets due to the economic slowdown. More
overseas players are also entering the local and other African
markets, increasing competition in what is widely considered to be the
last undeveloped continent for telecommunications. Coupled with this,
a large project in Mozambique was temporarily put on hold and slower
than expected network rollout in other parts of Africa further
impacted the operating margin. The margin therefore declined from a
very high 15,9% in June 2008 to a still healthy 13,7% in June 2009.
Security - 28,4% of group revenue
After a very strong performance, the effect of the recession was
particularly felt during the last four months when a number of
anticipated projects were postponed and the forward order book,
although still strong, was negatively impacted.
Revenue for the 12 months to June 2009 increased by 42,0% to R166
million (June 2008: R117 million) on the back of various large
projects secured in the previous financial year and executed in the
period under review. Operating profit increased by 57,2% from R13
million in 2008 to R21 million in 2009, with the operating margin
improving from 11,2% in 2008 to 12,4% in 2009.
Domestic Products - 17,9% of group revenue
In addition to the contracted consumer spending, the local domestic
appliances industry remains under threat from cheap imports. Within
this context, Domestic Products` strategy of diversifying its product
portfolio to include a wider range of products and customer base,
buffered the decline to some extent.
The market pressure was further exacerbated during the last four
months of the 16-month period by a two-month period of industrial
action at key customers.
On a comparable 12-month basis, revenue therefore dropped by 17,5%
from R127 million to R105 million. Although the division was very
prudent in its cost management, the downturn, coupled with the
industrial action, impacted the operating margin. The current margin
of 10,2% (compared to 11,0% in 2008) is admirable under the current
economic conditions. The group is confident that the margin will pick
up again in the first half of the new financial year due to better
capacity utilisation.
Electrical
Our associate investment in M-TEC makes up the electrical division and
as such has no revenue contribution. As reported in April this year,
this division was severely impacted by the slowdown in the South
African economy, which resulted in a substantial reduction in the
demand for cable products during the fourth quarter of 2008 and the
first quarter of 2009.
As M-TEC was awarded a substantial portion of Eskom`s contract to
expand their national grid, this business expanded its capacity for
the expected take off. However, the 18-month delay in this project, as
well as the continued delay in the awarding of a major fibre and
copper telecommunications contract by Telkom, negatively affected the
demand for aluminium conductor, fibre optic cables and copper
telecommunications products. The drop in volumes was exacerbated by
the dramatic drop in commodity prices during this period. M-TEC
therefore had to write down approximately R21 million of stock on hand
in the copper power cable and aluminium conductor divisions.
However, during the last four months the group has seen an improvement
in the trading conditions. An increase in fibre volumes was supported
by a slow, but steady, recovery in volumes in the power cable and
aluminium products. The result of this, coupled with cost reduction
programmes implemented during the period, more than doubled Jasco`s
share of the M-TEC profit after tax for the 13 months to 30 June 2009
to R1,7 million from the R0,7 million for the nine months to 28
February 2009.
Acquisitions
To ensure sustained growth in an ever-changing environment, over the
years, Jasco continually added to its product offering, where
necessary starting new operations or acquiring businesses.
Acquisitions during the period or immediately post year-end included:
M-TEC
The group acquired 51% of both the ordinary and preference shares in M-
TEC for R214 million, settled through a cash consideration of R125
million and the issue of 27,4 million ordinary Jasco shares at R3,25
each. The cash portion was largely funded through the issue of R100
million in redeemable preference shares to JSE-listed BEE investment
group, AfroCentric Investment Corporation Limited (AfroCentric).
Taihan Electric Wire Company (Taihan) of South Korea, one of the top
cable manufacturing companies in the world, owns the balance of M-TEC.
In terms of the sale of shares agreement, Taihan retained management
control in M-TEC and this investment is therefore accounted for as an
associate company. Through the issue of the ordinary shares,
AfroCentric holds an effective 34,9% interest in Jasco, whilst
Community Investment Holdings (Pty) Limited (CIH) still owns 23,9%.
Through these transactions, together with the finalisation of the 2003
BEE transaction, the group has formally become a black owned entity,
as well as expanded its presence in the transport component of a
typical communications network, increased the diversified nature of
its portfolio and enabled access to the infrastructure side of the
electricity and power sectors.
Although the timing of the M-TEC acquisition was unfortunate as it was
made just before the global financial crisis hit, it remains a very
good strategic fit with Jasco. The M-TEC acquisition was a strategic
long term investment to increase Jasco`s presence in the
infrastructure build sector and convert the group to a black-owned
business. The group remains confident that M-TEC will contribute
strongly to Jasco over the long term.
RCW and Maringo
Jasco made two small bolt-on acquisitions in the Telecommunications
division - that of Radio Communications Warehouse (RCW) and Maringo
(subsequent to year end). RCW was acquired for R3 million, which
represents the net book value of the stock and fixed assets. RCW is a
small business in Cape Town supplying components and products to the
Private Mobile Radio industry that complement the traditional product
range offered by Webb Industries in this market sector.
The acquisition of a 30% stake in the integrated communications
service provider, Maringo, for an initial consideration of R4 million
illustrates another progression in Jasco`s strategy. Providing
converged information, communications and technology services, Maringo
creates a presence for Jasco in the lucrative converged communications
services market. The Maringo business offering also fits neatly with
Jasco`s existing presence across the communications supply chain and
has the potential to expand the provision of Jasco`s products and
services with new and existing clients.
SUBSEQUENT EVENTS
No matters which are material to the financial affairs of the group
have occurred between the balance sheet date and the date of this
announcement.
PROSPECTS
Jasco has steadily put a business structure in place that supports
successful operations in different markets and allows the group to
manage variable market conditions. Looking forward, the group`s
prospects, as with those of many other companies, will be
significantly influenced by macro-economic conditions and the manner
in which the local economy copes with a very fluid global context.
To ensure a robust strategy against these volatile markets, a
comprehensive strategic planning process was undertaken during 2008.
Moving forward, Jasco is therefore sharpening its focus on servicing
and influencing the full breadth of the communications supply chain.
This allows the group to stay flexible in terms of evolving its
service offering as the market context changes and to cross-sell
products and services to existing and new clients, opening up
significant growth opportunities within the existing group structure.
Infrastructure development in South Africa and across the continent
will play an important role in the group`s approach to growth. While
the global economy is experiencing a significant slowdown in consumer
spend, infrastructure development continues - albeit some projects at
delayed timetables - in South Africa and the rest of Africa.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of shareholders
will be held at 11h00 on Wednesday, 14 October 2009 in Jasco`s
boardroom, Woodmead Office Park, 8 Saddle Drive, Woodmead, to transact
the business stated in the notice of the Annual General Meeting
contained in the Annual Report, which Annual Report is in the process
of being prepared and which will be posted to shareholders by no later
than 21 September 2009.
For and on behalf of the Board
Dr ATM Mokgokong MH Lotz WA Prinsloo
(Non-Executive (Chief Executive (Financial Director)
Chairperson) Officer)
15 September 2009
SUMMARISED CONSOLIDATED INCOME STATEMENTS
Audited Audited
30 June 29 February
(R`000) Notes 2009 2008
Revenue 773 250 519 161
Turnover 760 203 513 572
Interest received 13 047 5 589
Operating profit before interest 65 913 49 488
and taxation
Interest received 13 047 5 589
Interest paid (25 337) (6 527)
Profit before taxation and share 53 623 48 550
of income from joint venture
Equity accounted income from 1 683 -
associate
Equity accounted income from joint 4 620 1 136
venture
Profit before taxation 59 926 49 686
Taxation (22 423) (16 201)
Profit for the year 37 503 33 485
Reconciliation of headline
earnings
Net earnings attributable to 37 503 33 485
ordinary shareholders
Headline earnings adjustments 485 17
-loss on disposal of fixed assets 485 17
Headline earnings 37 988 33 502
Number of shares in issue (`000) 114 509 69 931
Treasury shares (`000) 2 913 1 527
Weighted average number of shares 1 103 471 68 404
on which earnings per share is
calculated (`000)
Dilutive shares - pref shares 1 2 890 17 163
Dilutive shares - CEO share 2 4 991 4 991
incentive scheme
Weighted average number of shares 111 352 90 558
on which diluted earnings per
share is calculated (`000)
Ratio analysis
Attributable earnings 37 503 33 485
Earnings per share (cents) 36,2 49,0
Diluted earnings per share (cents) 33,7 37,0
Headline earnings per share 36,7 49,0
(cents)
Diluted headline earnings per 34,1 37,0
share (cents)
EBITDA 81 719 56 125
Net asset value per share (cents) 249,4 221,0
Net tangible asset value per share 205,3 154,6
(cents)
Dividend per share (cents)
-final 10,0 16,0
Debt:Equity (%) 51,0 -
Interest cover (times) 5,9 54,0
Note:
1.The weighted average number of shares increased from 68 404 120
shares in February 2008 after the issue of the 27 415 385 shares on
the acquisition of M-TEC (1 June 2008) and the "conversion" of the 17
162 969 preference shares on 21 May 2008 (BEE transaction).
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
Audited Audited
30 June 29 February
(R`000) 2009 2008
ASSETS
Non-current assets 360 751 86 904
Plant and equipment 27 867 27 414
Investment in joint venture 11 551 6 931
Investment in associate 219 396 -
Goodwill 45 616 45 448
Deferred tax asset 1 957 5 205
Other financial assets 54 364 1 906
Current assets 171 241 189 110
Inventories 61 791 51 080
Trade and other receivables 99 775 99 205
Taxation prepaid 9 451 -
Cash and cash equivalents 224 38 825
Total assets 531 992 276 014
EQUITY AND LIABILITIES
Share capital and reserves 258 008 151 178
Non-current liabilities 108 387 3 183
Interest bearing liabilities 101 530 2 884
Non-interest bearing liabilities - 299
Deferred tax liability 6 857 -
Current liabilities 165 597 121 653
Interest bearing liabilities 30 332 8 053
Non-interest bearing liabilities 135 229 104 213
Taxation liability 36 9 387
Total equity and liabilities 531 992 276 014
STATEMENTS OF CHANGES IN EQUITY
Audited Audited
30 June 29
February
(R`000) 2009 2008
Opening balance 151 178 125 605
Issue of share capital 88 918 -
Treasury shares - Share Incentive Trust (231) (146)
Share based payment reserve 2 758 1 146
Profit for the period/year 37 503 33 485
Dividends paid (22 119) (8 912)
Closing balance 258 008 151 178
SUMMARISED CONSOLIDATED CASH FLOW STATEMENTS
Audited Audited
30 June 29
February
(R`000) 2009 2008
Cash generated from operations before 76 912 55 440
working capital changes
Working capital changes 17 490 (13 473)
Cash generated from operations 94 402 41 968
Net financing costs (12 290) (169)
Net taxation paid (30 881) (13 659)
Dividends paid (22 119) (8 912)
Cash flow from operating activities 29 112 19 228
Cash flow from investing activities (94 263) (12 160)
Cash flow from financing activities (1 824) 1 608
(Decrease)Increase in cash resources (66 975) 8 676
SUMMARISED SEGMENTAL REPORTS
30 June 2009 29 February 2008
(Audited) (Audited)
Operating Operating
(R`000) Revenue profit/ Revenue profit/
(loss)* (loss)*
Telecommunications 406 477 58 988 282 034 41 453
Security 210 620 25 410 94 554 8 254
Domestic Products 143 107 13 489 139 306 16 081
Electrical - 1 620 - -
Sub-total operating 760 204 99 507 515 894 65 788
divisions
Other 13 046 (27 289) 3 267 (15 164)
Total 773 250 72 218 519 161 50 624
*Operating profit/(loss) of the operating divisions includes the
equity accounted income from the joint venture (Telecommunications)
and associate (Electrical), presented after tax, but excludes interest
paid or received and is stated before making adjustments for inter-
group interest and administration fees.
AUDIT OPINION
The annual financial statements have been audited by the group`s
independent auditors, Ernst & Young Inc. A copy of their unmodified
report is available for inspection at Jasco`s registered office.
References to the comparative 12-month period ended 28 February 2009
were reviewed and references to the comparative 12-month periods
ending 30 June 2009 and 2008 are unaudited.
Directors and Secretary
Dr ATM Mokgokong (Chairperson), MJ Madungandaba (Deputy Chairperson),
PS Chapwanya+, FE Emary, JC Farrant, Dr JM Matsipa, Dr J Rothbart, JA
Sherry (Non-Executives), MH Lotz (CEO), WA Prinsloo (Financial
Director), O Seiphemo (Marketing Director) (Executives), MN Sepuru
(Company Secretary)
+ Zimbabwean
Registered office
8 Saddle Drive, Woodmead Park, Woodmead 2157
Transfer secretaries
Link Market Services SA (Pty) Ltd, 11 Diagonal Street, Johannesburg
2001
Sponsor
PSG Capital (Pty) Ltd, Johannesburg branch, Building 8 Woodmead
Estate, 1 Woodmead Drive, Woodmead 2191
Further details can be found on the group`s website: www.jasco.co.za
INCORPORATING:
Webb Industries WebbLeBLANC Telesciences Tasslelane Technologies
Tasslelane Services RapidCloud Maringo Special Cables T-Components
Multivid Scafell M-TEC
Date: 16/09/2009 07:05:02 Produced by the JSE SENS Department.
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