| Thu 4 Feb 2010, 8:00 | | JSC - Jasco Electronics Holdings Limited - Unaudited Interim Results For Six |
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JSC - Jasco Electronics Holdings Limited - Unaudited Interim Results For Six
Months Ended 31 December 2009
JASCO ELECTRONICS HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1987/003293/06
Share code: JSC
ISIN: ZAE000003794
UNAUDITED INTERIM RESULTS FOR SIX MONTHS ENDED 31 DECEMBER 2009
Effects of recession continued to impact
Against this, all divisions remained profitable
Main impact seen in Telecommunications and Security
Positive contribution from Electrical
M-TEC contributed R2,9 million
New acquisition, Lighting Structures, earnings enhancing
INTRODUCTION
Jasco Electronics Holdings Limited (Jasco or "the company" or "the group")
has a diversified portfolio of four divisions operating in the growth sectors
of Telecommunications, Domestic Products, Security and Electrical. Jasco
specialises in integrated build, operate and maintenance solutions to the
telecommunications and electronic security industry in Africa.
RESULTS OVERVIEW
As Jasco changed its year end from February to June during 2009, the results
for the six months ended 31 December 2009 are compared to the six months
ended 31 August 2008. However, to ensure like-for-like comparisons, the
company is also providing stakeholders with the results for the six months
ended 31 December 2008. The full summarised unaudited results are available
at www.jasco.co.za.
As reported for the 16 months to 30 June 2009, the trading environment
deteriorated dramatically from March 2009 onwards. Against this, all
divisions remained profitable although results were negatively impacted due
to significant delays in Security contracts, as well as the lack of fixed-
line spend and the postponement of wireless African roll outs in
Telecommunications.
Basis of preparation
The results comply with IAS 34 - Interim Financial Reporting and have been
prepared using the Revised IAS 1 - Presentation of Financial Statements and
IFRS 8 - Operating Segments.
With the exception of the adoption of IFRS 3 (revised) - Business
Combinations, the accounting policies and methods of computation used in the
preparation of this report are consistent with those used in the annual
financial statements for the year ended 30 June 2009, which comply with
International Financial Reporting Standards, the Companies Act of South
Africa and the Listings Requirements of the JSE Limited.
Financial review
Revenue for the six months ended 31 December 2009 increased by 6% to R264
million (6 months to 31 Aug 2008: R249 million). Operating profit decreased
by 34% to R16,1 million (Aug 2008: R24,3 million), whilst earnings per share
(EPS) and headline earnings per share (HEPS) decreased by 57% to 10,0 and
10,1 cents per share respectively (Aug 2008: EPS 23,4; HEPS 23,5 cents per
share).
Comparative revenue for the six months to December 2009 of R264 million
decreased by 18% (Dec 2008: R322 million), whilst operating profit for the
same period declined by 51% from R32,6 million to R16,1 million. Profit
attributable to ordinary shareholders declined by 28% to R11,2 million (Dec
2008: R15,6 million) following improved contributions from the investments in
the WebbLeBLANC JV and associate M-TEC.
Cash generated from operations amounted to R5 million for the six months to
December 2009 (Dec 2008: R50 million). The decrease was mainly due to a
change in working capital movements. During the 16 months to June 2009, cash
generation was exceptionally high due to advantage taken of payment
extensions granted by creditors. The last six months were impacted by the
change in year end which resulted in earlier payments to creditors before the
December break.
Average working capital days of 32,1 days for the six months to December 2009
decreased from the 22,4 days for the 16-month period to 30 June 2009. This
was due to the higher payments made to creditors during the last six months
as debtors days reduced.
After accounting for financing costs and taxation paid, the repayments from
the group`s Transnet rental project, the net cash outflow in other investing
activities, as well as the raising of a R30 million term loan, the group
increased its cash resources by R27 million, decreasing the bank overdraft to
R1 million. The term loan bears interest at JIBAR plus 5,62% and is repayable
by September 2012 in equal quarterly instalments. The debt:equity ratio,
including the R100 million redeemable preference shares issued to finance the
acquisition of the group`s share in M-TEC is 54%. Excluding the preference
shares, the debt:equity ratio is 18%.
Operational review
As reported during September 2009, the market downturn was first felt within
the durable goods industry, which impacted negatively on the Domestic
Products division. During the six months under review, the position improved
slightly, with this division increasing volumes and operating profit.
However, the Security division saw 65% of its project pipeline cancelled or
delayed and revenue for this period does not include any major contracts.
Telecommunications maintained its position in the wireless arena in South
Africa, but saw roll-out delays in the rest of Africa and a further decline
in local expenditure on fixed line networks.
The group`s associate, M-TEC, continued its turnaround during this period,
turning the loss of R0,6 million incurred for the six months to December 2008
into a profit of R2,9 million. The acquisition of 51% of Lighting Structures
further contributed to the profits of the Electrical division.
Telecommunications - 27,2% of segmental revenue and 43,7% of consolidated
group revenue
On a comparative December 2008 to December 2009 basis, Telecommunications
revenue declined by 11% to R175 million (Dec 2008: R197 million). Operating
profit declined by 26% to R17,9 million (Dec 2008: R24,4 million).
The decrease was due to a continued decline in fixed line spend and slower
wireless roll out in the rest of Africa.
Although Jasco`s share of the loss in its new acquisition, Maringo, was lower
than expected (R380 000), this start-up business negatively impacted margins
by 1,4% during the period. Without this impact, the reported margin of 10,2%
for December 2009 would have been 11,6% (Dec 2008: 12,4%).
Security - 8,0% of segmental revenue and 19,8% of consolidated group revenue
After a very strong performance during the 12 months to February 2009 on the
back of a number of large projects executed, the effect of the recession was
particularly felt during the last 10 months when the majority of anticipated
projects were postponed indefinitely and the forward order book was
negatively impacted. However, the business model that covers overheads
through annuity and recurring income remained in place and the division
managed to show a small profit.
Revenue for the six months to December 2009 decreased by 48% to R51 million
(Dec 2008: R98 million). As a result of the lack of large contracts,
operating profit decreased by 82,3% to R3,7 million (Dec 2008: R21,1
million), with the operating margin down to 7,3% (Dec 2008: 21,4%).
Domestic Products - 8,7% of segmental revenue and 21,5% of consolidated group
revenue
The Domestic Products division first suffered from the economic downturn and
now appears to be the first to show some positive momentum from the perceived
economic turnaround in South Africa. Volumes increased from the six months
ended 31 December 2008, even though revenue remained flat at R56 million (Dec
2008: R57 million) due to the overall decrease in commodity prices.
Operating profit increased slightly to R7,3 million (Dec 2008: R6,9 million),
resulting in an improvement in operating margin to 13,1% (Dec 2008: 12,0%).
This was achieved due to the continued effort by management to reduce costs
and operate more efficiently.
Electrical - 56,2% of segmental revenue and 15,0% of consolidated group
revenue
The recently acquired Lighting Structures business (see below) and the
group`s associate investment in M-TEC constitute the Electrical division.
A steady increase in volumes in the copper, fibre and aluminium products
during the period under review, coupled with the cost reduction programmes
implemented during the first half of calendar 2009, resulted in a further
improvement in the contribution from M-TEC. Jasco`s portion of M-TEC`s after
tax profit for the six months to December 2009 of R2,9 million therefore
compares extremely favourably to the loss of R0,6 million for the six months
ended December 2008.
With effect from 1 September 2009, Jasco acquired 51% of Lighting Structures
(Pty) Ltd (Lighting Structures) for a total consideration of R7 million in
cash. Lighting Structures has been in existence for over 20 years and
designs, manufactures and installs lighting, broadcasting and
telecommunications steel structures in Sub-Saharan Africa. This business
broadens Jasco`s Telecommunications offering to include monopole structures
and adds new customers in the electrical field.
The remaining 49% equity interest is held by LeBLANC Communications South
Africa, a subsidiary of LeBLANC International. LeBLANC International is also
Jasco`s JV partner in WebbLeBLANC.
Lighting Structures contributed R1,3 million of after tax profits to Jasco`s
earnings for the four month period to December 2009.
Subsequent events
No significant events have occurred in the period between the reporting date
and the date of this announcement.
PROSPECTS
The group enters the next six months with all its divisions in a profitable
position. The last six months have been an opportunity to invest in key
people and to focus on efficiencies. This will assist Jasco in buffering the
expected continuation of negative markets.
The group expects continued pressure over the short term in
Telecommunications; however, to counter this, management will focus on the
reduction in overheads and tight cost management. The outlook over the longer
term remains positive, as low penetration in Africa will necessitate spend on
voice and data.
Although Security will continue to experience project delays due to market
pressure, its business model will continue to cover overheads. Management has
implemented a more formalised sales network to drive annuity and recurring
income, as well as further cost-cutting and efficiency programmes without
losing capacity for an eventual upturn. The group will also focus on
expanding its product range and diversifying its service offering.
Domestic Products should continue to see an improvement. Although job cuts
that occurred during 2009 will pressure consumers, a gradual increase is
expected on the back of current lower interest rates.
In Electrical, Jasco will continue to focus on costs and efficiencies. The
project flow appears more positive, with orders placed on M-TEC for the next
12 months under an existing aluminium overhead conductor contract.
Jasco has a focused medium to long term growth plan in place, with a clear
strategy being driven by the senior management team to enhance organic growth
and to bulk up. Although market visibility remains unclear, management is
focused on taking pro-active action to protect profitability and grow the
group.
For and on behalf of the Board
Dr ATM Mokgokong MH Lotz WA Prinsloo
(Non-Executive (Chief Executive (Financial Director)
Chairperson) Officer)
4 February 2010
Summarised consolidated statements of comprehensive income
Unaudited Unaudited
6 months 6 months Audited
ended ended 30 June
31 December 31 August % 2009
(R`000) Note 2009 2008 change 16 months
Revenue 264 009 248 947 6,1 773 250
Turnover 258 744 247 598 4,5 760 203
Interest received 5 265 1 349 13 047
Operating profit before
interest
and taxation 16 085 24 318 (33,9) 65 913
Interest received 5 265 1 349 290,3 13 047
Interest paid (8 022) (5 408) 48,3 (25 337)
Share of income from 2 486 1 603 55,1 4 620
joint venture
Share of income from 2 536 7 842 (67,7) 1 683
associates
Net profit before 18 350 29 704 (38,2) 59 926
taxation
Taxation (5 802) (8 630) (32,8) (22 423)
Profit for the 12 548 21 074 (40,5) 37 503
period/year
Other comprehensive - - -
income
Total comprehensive 12 548 21 074 (40,5) 37 503
income for the
period/year
Profit and total
comprehensive income
attributable to:
- minority shareholders 1 319 - -
- equityholders of the 11 229 21 074 37 503
parent
12 548 21 074 37 503
Net earnings attributable 11 229 21 074 (40,5) 37 503
to equityholders of the
parent
Headline earnings 70 157 485
adjustments
- loss on disposal of (204) 157 485
fixed assets
- transaction costs -
acquisition
of Lighting Structures 274 - -
Headline earnings 11 299 21 231 (46,8) 37 988
Number of shares in issue 114 509 114 509 114 509
(`000)
Treasury shares (`000) 2 682 2 769 2 913
Number of shares on 1 111 827 90 235 103 471
which earnings per share
is calculated (`000)
Dilutive shares - pref 1 - 7 649 2 890
shares
Dilutive shares - CEO 2 4 991 4 991 4 991
share incentive scheme
Number of shares on which 116 818 102 875 111 352
diluted earnings per
share is calculated
(`000)
Ratio analysis
Attributable earnings 11 229 21 074 (46,7) 37 503
Earnings per share 10,0 23,4 (57,0) 36,2
(cents)
Diluted earnings per 9,6 20,5 (53,1) 33,7
share (cents)
Headline earnings per 10,1 23,5 (57,1) 36,7
share (cents)
Diluted headline earnings 9,7 20,6 (53,1) 34,1
per share (cents)
EBITDA 25 103 37 157 (32,4) 81 719
Net asset value per share 244,7 278,5 (12,2) 225,3
(cents)
Net tangible asset value 198,1 228,2 (12) 185,5
per share (cents)
Dividend per share 6,0
(cents)
Debt:Equity (%) 54 47 (13,2) 51
Interest cover (times) 7,7 8,3 (8,0) 5,9
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 statements of financial position
Unaudited Unaudited Audited
31 December 31 August 30 June
(R`000) 2009 2008 2009
ASSETS
Non-current assets 357 630 313 228 360 751
Plant and equipment 27 506 28 088 27 867
Investment in joint venture 12 787 8 534 11 551
Investment in associate 221 932 225 386 219 396
Intangibles 52 091 45 022 45 616
Deferred tax asset - 5 444 1 957
Loans 43 314 754 54 364
Current assets 145 627 177 026 171 241
Inventories 53 648 75 923 61 791
Trade and other receivables 87 929 100 400 99 775
Taxation prepaid 4 050 703 9 451
Cash and cash equivalents - - 224
Total assets 503 257 490 254 531 992
EQUITY AND LIABILITIES
Equity and reserves 273 588 250 905 258 008
Non-current liabilities 137 733 105 982 108 387
Interest bearing liabilities 133 025 105 982 101 530
Deferred tax 4 708 - 6 857
Current liabilities 91 936 133 367 165 597
Interest bearing liabilities 10 609 10 728 30 332
Non-interest bearing 81 327 109 677 135 229
liabilities
Taxation - 12 962 36
Total equity and liabilities 503 257 490 254 531 992
Summarised consolidated statements of changes in equity
Unaudited Unaudited
6 months 6 months Audited
ended ended 30 June
31 December 31 August 2009
(R`000) 2009 2008 16 months
Attributable to equity holders
of the parent
Opening balance 258 008 151 178 151 178
Issue of share capital - 88 904 88 919
Treasury shares - Share Incentive 144 (10) (231)
Trust
Share based payment reserve 870 718 2 758
Total comprehensive income 11 229 21 074 37 503
- Profit for the period/year 11 229 21 074 37 503
- Other comprehensive income - - -
Dividends paid - (10 959) (22 119)
Closing balance 270 251 250 905 258 008
Minority interests
Opening balance - - -
Subsidiaries acquired during the 2 018 - -
year
Total comprehensive income 1 319 - -
- Profit for the period/year 1 319 - -
- Other comprehensive income - - -
Closing balance 3 337 - -
Total equity and reserves 273 588 250 905 258 008
Summarised consolidated statements of cash flows
Unaudited Unaudited Audited
6 months 6 months 30 June
ended ended 2009
31 December 31 August
(R`000) 2009 2008 16 months
Cash generated from operations
before working capital changes 20 751 28 648 76 912
Working capital changes (15 814) (28 653) 17 490
Cash generated from operations (4 933) (5) 94 402
Net financing costs (2 757) (4 059) (12 290)
Net taxation paid (1 397) (5 997) (30 881)
Dividends paid - (10 933) (22 119)
Cash flow from operating activities 779 (20 994) 29 112
Cash flow from investing activities 4 418 (220 (94 263)
678)
Cash flow from financing activities 22 193 192 119 (1 824)
Increase/(decrease) in cash 27 390 (49 553) (66 975)
resources
Summarised consolidated segmental reports
for the six months ended 31 December 2009, 31 August 2008 and the financial
year ended 30 June 2009
31 December 31 August 30 June
2009 2008 2009
(Audited)
(R`000) (16 months)
(Unaudited) (Unaudited)
Revenue
Telecommunications 175 199 182 980 499 246
Security 51 480 47 524 210 620
Domestic Products 55 877 56 731 143 107
Electrical 362 331 278 372 814 355
Sub-total operating divisions 644 887 565 607 1 667 328
Other divisions 5 265 1 349 13 047
Adjustments* (386 143) (318 009) (907 125)
Total 264 009 248 947 773 250
Operating profit/(loss)
Telecommunications 17 944 26 022 66 394
Security 3 737 5 664 29 186
Domestic Products 7 299 5 295 13 489
Electrical 18 282 32 874 16 437
Sub-total operating divisions 47 262 69 855 125 506
Other divisions (8 742) (8 243) (27 352)
Adjustments* (17 413) (27 849) (25 936)
Total** 21 107 33 763 72 218
* The adjustments consist of inter-divisional elimination entries, as
well as adjustments required to reconcile the segmental revenue and
results to the amounts reported in the statement of comprehensive
income.
** The total operating profit includes the equity accounted income from
the joint venture (Telecommunications) and associates
(Telecommunications and Electrical), presented after tax, but excludes
interest paid or received and is stated before making adjustments for
inter-group interest and administration fees.
Contingent liability
During 2007, SARS revised its assessment of income taxation for Jasco for the
year 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 continue to believe that the
reassessments are invalid, and continue to treat the matter conservatively as
a contingent liability whilst objections are being raised.
Directors and Secretary Dr ATM Mokgokong (Chairperson), MJ
Madungandaba (Deputy Chairperson), AMF da Silva, JC Farrant, Dr J Rothbart,
JA Sherry (Non-Executives), MH Lotz (CEO), WA Prinsloo (Financial
Director), O Seiphemo (Marketing Director) (Executives), MN Sepuru (Company
Secretary)
Registered office 8 Saddle Drive, Woodmead Park, Woodmead 2157
Transfer secretaries Link Market Services SA (Pty) Ltd, 11 Diagonal Street,
Johannesburg 2001
Sponsor Grindrod Bank Ltd, 39 Rivonia Road, Cnr Helling Road, Sandton 2146
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 Lighting Structures
www.jasco.co.za
Date: 04/02/2010 08:00:04 Produced by the JSE SENS Department.
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