| Thu 10 Apr 2003, 9:14 | | Results For The Year Ended 28 February 2003 |
|
Jasco - Reviewed
Jasco Electronics Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003293/06)
Share code: JSC ISIN: ZAE000003794
("Jasco" or "the company" or "the group")
Website : www.jasco.co.za
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2003
* Attributable profits up 80,2%
* HEPS up 51,1%
* NTAV up 103,9%
* R16,3 million net cash generated
* Substantially improved balance sheet
* Final dividend declared
These highlights exclude the benefits derived from the recognition of a deferred
tax asset - see below
SUMMARISED INCOME STATEMENTS for the year ended 28 February 2003
Reviewed Audited
28 February 28 February
2003 2002 Change
R"000 R"000 %
Revenue 307 264 276 153 11,3
- from continuing operations 284 425 190 736 49,1
- from discontinued operations 22 839 85 417 (73,3)
Operating profit before interest and
foreign exchange profits 29 401 13 007 126,0
Foreign exchange (loss)/profit (5 083) 5 379
Net interest paid (3 962) (5 050) (21,5)
Operating profit 20 356 13 336
- from continuing operations 20 996 14 641 43,4
- from discontinued operations (640) (1 305)
Exceptional items 126 (1 769)
Net profit before taxation 20 482 11 567 77,1
Taxation (7 947) -
Net profit after taxation 28 429 11 567 145,8
Outside shareholders" interest - 201
Net profit attributable to
ordinary shareholders 28 429 11 366 150,1
Exceptional items (126) 1 769
Headline earnings 28 303 13 135 115,5
Exceptional items 126 (1 769)
- impairment of investment - (3 279)
- profit on disposal of subsidiary 1 994 9 216
- amortisation and impairment of intangibles (1 799) (2 000)
- loss on disposal of business operations (278) (1 782)
- profit/(loss) in discontinuing of
operations 209 (3 924)
Number of shares in issue ("000) 48 812 48 812
Number of shares on which earnings per share
is calculated ("000) 48 812 47 566
Ratio analysis including the benefit derived
from recognising the deferred tax asset
Attributable profits 28 429 11 366 150,1
Profit per share (cents) 58,2 23,9 143,5
Headline earnings per share (cents) 58,0 27,6 110,1
EBITDA 29 563 21 950 34,7
Net asset value per share (cents) 111,6 61,7 80,9
Net tangible asset value per share (cents) 89,5 35,9 149,3
Dividend per share - Interim (cents) 5 - -
- Final (cents) 6 - -
Debt: Equity (%) - 51 100,0
ROAM (%) 21 8 162,5
Ratio analysis excluding the benefit derived
from recognising the deferred tax asset
Attributable profits 20 482 11 366 80,2
Profit per share (cents) 42,0 23,9 75,7
Headline earnings per share (cents) 41,7 27,6 51,1
EBITDA 29 563 21,950 34,7
Net asset value per share (cents) 95,3 61,7 54,5
Net tangible asset value per share (cents) 73,2 35,9 103,9
Dividend per share - Interim (cents) 5 - -
- Final (cents) 6 - -
Debt: Equity (%) - 51 100,0
ROAM (%) 16 8 100,0
ABRIDGED CONSOLIDATED BALANCE SHEETS
at 28 February 2003
28 February 28 February
2003 2002
Notes R"000 R"000
ASSETS
Non-current assets 38 346 24 415
Plant and equipment 11 007 7 437
Intangibles 10 792 12 591
Deferred tax asset 7 947 -
Loans 8 600 4 387
Current assets 97 688 126 958
Inventories 27 933 28 305
Accounts receivable 66 747 50 790
Short-term loan - 7 754
Pre-payments 279 489
Cash on hand 2 729 39 620
Total assets 136 034 151 373
EQUITY AND LIABILITIES
Shareholders Funds 54 456 30 098
Non-current interest bearings liabilities 597 84
Current liabilities 80 981 121 191
Interest bearing liabilities 1 1 683 54 936
Non-interest bearing liabilities 79 298 66 255
Total equity and liabilities 136 034 151 373
Notes:
1. See comments made under the Khululeka Telecommunications paragraph.
2. The contingent liabilitities pertaining to the claim for work done by a sub-
contractor in Botswana, the judgement against one of our dormant companies by
SARS and the possible claim for damages for a collapsed structure has remained
unchanged reported in the 2002 annual financial statements.
STATEMENTS OF CHANGES IN EQUITY
28 February 28 February
2003 2002
Notes R"000 R"000
Opening balance 30 098 20 455
Attributable profit 28 429 11 366
Dividends paid (2 440) -
Net shares (acquired)/issued (1 650) 601
Profit on translation of foreign subsidiary 19 -
Decrease in non-distributable reserves - (2 324)
Closing balance 54 456 30 098
ABRIDGED CONSOLIDATED CASH FLOW STATEMENTS
R"000 R"000
Cash generated from operations 22 744 18 273
Net financing costs (3 962) (5 050)
Net taxation paid (631) -
Dividends paid (2 440) -
Cash flow from operating activities 15 711 13 223
Cash flow from investing activities (1 769) 21 063
Cash flow from financing activities 2 404 1 371
Increase in cash resources 16 346 35 657
SEGMENTAL REPORT
for the year ended 28 February 2003 (Operating divisions only)
Telelcoms Manuf. Security Other
division division division (discontinued)
2003 R"000 R"000 R"000 R"000
Revenue 201 003 60 560 22 030 22 839
Operating profit* 21 845 11 387 1 378 (640)
2002
Revenue 111 401 45 764 28 274 85 417
Operating profit* 14 193 5 951 4 120 (1 305)
*Operating profit is stated before making adjustments for inter-group interest
and administration fees.
RESULTS
The positive effects of the turnaround strategy implemented during the
previous financial year continued gathering momentum, producing strong results.
In order to comply with the provisions of AC 102 (Income Taxes) and primarily as
a result of the group"s return to profitability, the group has raised a deferred
tax asset of R7,9 million in respect of the unused tax losses at 28 February
2003. The raising of the defferred tax asset has increased headline earnings per
share and net asset value per share by 16,3 cent.
However to make more meaningful comparisons and reflect the actual trading
results for the year, the benefit derived from recognising this deferred tax
asset is excluded from the following analysis:
* Revenue from continuing operations improved by 49,1% to R284,4 million (2002:
R190,7 million).
* Operating profit from continuing operations increased by 43,4% to R21,0
million (2002: 14,6 million).
* Operating profit before interest and foreign exchange translation differences
improved by 126,0% to R29,4 million (2002: R13,0 million).
1. Return on Assets Managed ("ROAM"), a key operational performance area that is
closely monitored by Jasco management, doubled from 8,0% to 16,0%.
2. Net tangible asset value ("NTAV") more than doubled to 73,2 cents per share
(2002: 35,9 cents per share).
The strengthened balance sheet reflects the positive cash flow of
R16,3 million, enabling the company to end the year with a small cash balance of
R1,3 million compared to an overdraft of R15,0 million last year. Cash generated
from operations amounted to more than 90% of the operating profits before
interest, tax and dividends paid.
OPERATIONS
All divisions ended the year profitably.
TELECOMMUNICATIONS
The Telecommunications division increased revenue by 80,4% to R201,0 million
(2002: R111,4 million), contributing 65,4% of group revenue.
The division focuses on the provision of niche solutions, products and
services to telecommunications networks, providing the entire network
infrastructure, other than the switch. A number of products, designed and
manufactured in-house, are combined with a range of strategically selected
products sourced on an exclusive basis from leading overseas suppliers.
The Telecommunications division continued to produce strong growth in the
local market and also successfully exported products and services to Africa and
the European Union. Particularly good orders were received from Nigeria and
Mozambique, countries that are in the process of major ongoing
telecommunications expansions. In addition, locally designed and manufactured
antennas were successfully exported to the EU and USA where they are used in
vehicle and other asset tracking applications. However, the strong export
performance was somewhat negatively impacted by the strengthening of the Rand,
especially in the latter half of the year when the division sustained a R5,1
million foreign exchange loss.
Strategic partnership
The Telecommunications division established a business three years ago called
Jascotel. Jascotel is mainly involved in the turnkey building of base stations
for cellular operators in Africa, with successful contracts in Rwanda, Botswana
and Mozambique.
To ensure Jascotel"s success, specialist project management skills are
crucial. These skills are difficult to source and retain in Africa. As a result,
Jasco formed a 50/50 joint venture, effective April 2003, with a global Israeli-
based construction and technology company; Baran Raviv Ltd. Baran"s
telecommunications division has significant experience in wide-ranging
telecommunications network building activities in several locations, including
Thailand, Turkey, Israel and Germany.
The joint venture is conducted through a new company, called BRJ Projects
(Pty) Ltd ("BRJ") and has, together with Jascotel, successfully built 20
cellular base station sites for the cellular operator, mCel in Mozambique. The
group is currently shortlisted by mCel to build a further 100 sites for phase
two of the project. BRJ is well-positioned to exploit further telecommunications
growth opportunities throughout Africa.
MANUFACTURING
The Manufacturing division increased revenue by 32,3% to R60,6 million (2002:
R45,8 million), contributing 19,7% of group revenue.
The division manufactures a number of in-house products and focuses on
component manufacture for the electrical and electronics industries.
Strong demand for electronic components from manufacturers of domestic
appliances in the local market, and increasing exports of appliances for
electrification projects throughout Africa, benefited the division. There was
also significant local demand for Jasco"s pool chlorinator, Just-Chlor(r), and
exports to the EU and South America continue to grow.
SECURITY
The Security division showed a decrease in revenue of 22,1% to R22,0 million
(2002: R28,3 million), contributing 7,2% of group revenue.
This division focuses on the development, supply and integration of
customised surveillance and other security systems. The client base includes
mines, financial institutions and municipalities.
The Security division, whilst still being profitable, had a poor year. A
recovery strategy was implemented during 2003, but was only completed in the
last quarter of the financial year, making the division a relatively small
contributor to group profitability during the year under review. However, the
business is gathering momentum and is expected to be a significant contributor
during the next twelve months.
DISCONTINUED OPERATIONS
The revenue attributable to discontinued operations relates to Technology
Junction, the last of the distribution business originally earmarked for sale as
part of Jasco"s strategic disposal of a number of low-margin, non-core
businesses over the past two years.
The sale of this business to a consortium of investors, including management,
was concluded in January 2003.
BLACK ECONOMIC EMPOWERMENT ("BEE")
It has been a long stated policy of Jasco to become a BEE company. The group
stated as far back as 1999 that it intended to find a partner who could make a
quantifiable contribution to Jasco"s business to prevent a dilution in earnings
per share following the transaction.
Jasco announced on 13 March 2003 that it had acquired Tasslelane Investments
(Proprietary) Limited ("Tasslelane"), a wholly-owned subsidiary of BEE company
Community Investment Holdings (Proprietary) Limited ("CIH") for R31 million.
Tasslelane holds the exclusive distribution rights for 3M telecommunications
products in South Africa and has secured long-term supply agreements with Telkom
SA Limited.
The transaction is a further step in the turnaround strategy the group set
out to achieve three years ago. Having restructured management and eliminated
the low-margin non-performing businesses, Jasco is now set to grow. The BEE
transaction has strengthened the group"s long-term sustainability as Jasco has
an established blue-chip client base that includes several government/public
sector and parastatal companies that require suppliers to have meaningful black
empowerment credentials.
The purchase consideration will be settled through the issue and allotment of
new ordinary shares and new redeemable preference shares in Jasco. The ordinary
shares allotted to CIH will equate to 30% of Jasco"s enlarged ordinary share
capital. The redeemable preference shares will, subject to certain minority
protections, increase the voting rights of CIH to 51% of Jasco"s enlarged total
share capital. This will give CIH voting control and will assist Jasco to become
a fully-fledged BEE company.
The unique structure allows immediate empowerment without cumbersome debt
structures and is not expected to dilute the earnings attributable to current
shareholders. In addition, the transaction addresses many of the government"s
criteria for true BEE, such as majority control, operational participation and
the transfer of skills in senior positions. Some other aspects of the agreement
are:
* CIH has undertaken to hold their Jasco shares for a minimum period of five
years.
* The projected earnings of Tasselane, based on agreements in place, are
expected to be sufficient to offset the effect of issuing the new ordinary
shares.
* The issue of the redeemable preference shares will not dilute earnings or
dividend attributable to ordinary shareholders.
* The redeemable preference shares will only be entitled to receive dividends
provided ordinary shareholders have been paid a dividend and if Jasco achieves
real growth in annual earnings based on a minimum threshold formula of CPIX plus
5%. Any such dividend will only be payable on surplus earnings above the
threshold and at a dividend rate of 25% less than that applicable to ordinary
shareholders.
* If, after publication of Jasco"s financial results for the year ending 29
February 2008, Jasco"s total earnings for the five-year period exceed a growth
rate of CPIX + 5% for the entire period, the redeemable preference shares will
be redeemed at par value and new ordinary shares will be issued to CIH at the
same price.
* A committee of at least three independent directors, initially led by the
current Chairman of Jasco, will protect the minority rights of current Jasco
shareholders for the next five years by having a veto right on major decisions
(including changes in share capital, the Board, accounting policies, or gearing,
as well as rights issues and acquisitions or disposals).
* The current senior Jasco management are fully supportive of the deal and have
committed to remain at the group for at least a further two years.
* Dr. Anna Mokgokong, Mr. Merika Johannes Madungandaba and Mr. Sakhile Masuku,
who are currently directors of CIH, will join the Jasco Board and Dr. Mokgokong
will assume the role of Chairperson on approval of the transaction. The current
directors of Jasco will remain on the Board.
* CIH directors bring valuable experience and diversification to the Board,
which will now display a better BEE profile.
The transaction is subject to a number of suspensive conditions, including
the approval of current Jasco shareholders. A detailed circular will be posted
to shareholders on or about 23 April 2003 convening a special general meeting of
shareholders, which will be held in mid-May 2003, to approve the transaction.
Khululeka Telecommunications
Jasco has had another operational BEE initiative in place since 1999 through
a 20% holding in Khululeka Telecommunications (Pty) Ltd (which trades as Alro
Composites).
An agreement has been concluded between Jasco and the BEE partner in
Khululeka in terms of which Jasco will acquire the entire issued share capital
of Khululeka with effect from 1 March 2003 for an amount of R80 000. Jasco also
assumes responsibility for Khululeka"s net liabilities amounting to
approximately R18,3 million. The liabilities are already reflected as non-
interest bearing debt in the accompanying financial statements for the year
under review and in the prior year as a liability. Accordingly, the transaction
will not have any material impact on Jasco"s net asset value. However, it will
have a short-term impact on Jasco"s gearing ratio as the assumed liability is
materially represented by an interest bearing bank overdraft.
PROSPECTS
The group"s successful turnaround strategy, with all the divisions correctly
structured, has positioned the group to take advantage of growth opportunities
within its focus areas.
In contrast to the rest of the world, the South African and African
telecommunications markets will remain in a growth phase until the current low
teledensity is rectified by projects such as those contained in the NEPAD
initiative. In addition, both the Manufacturing and Security divisions are
operating in growth sectors. Manufacturing is expected to continue benefiting
from the electrification rollout in Africa. Security, growing off a low base, is
expected to achieve significant growth from its ongoing opportunities in mining,
retail and financial sectors and from local authorities.
The conclusion of the BEE deal strengthened the group"s long-term sustainable
growth as it ensured that Jasco is correctly positioned and structured to
successfully bid for future Government/public sector and parastatal business.
In the absence of any unforeseen circumstances, management expects earnings
per share to continue to show real growth, notwithstanding the proposed increase
in the number of shares issued.
ACCOUNTING POLICIES
These results were prepared using accounting policies which are in accordance
with the Statements of Generally Accepted Accounting Practice. These policies
are consistent with those applied in the financial statements for the year ended
28 February 2002.
REPORT OF THE INDEPENDENT AUDITORS
The financial information contained in this announcement has been reviewed by
Jasco"s Auditors, Ernst & Young Chartered Accountants (SA). A copy of the
unmodified review report is available for inspection at Jasco"s registered
office.
DIVIDEND
After the interim period, having regard to the improved performance and cash
position of Jasco, and recognising that no dividend was paid in the prior year,
the directors declared an interim dividend (No. 12) of 5 cents per share.
In view of the ongoing improvement in Jasco"s results and the generation of
cash, the directors have resolved to declare a final dividend (No. 13) of 6
cents per share, bringing the total for the year to 11 cents per share.
To comply with the procedures of STRATE, the following dates are applicable:
Last day to trade "CUM" the dividend: Friday, 30 May 2003
Date commence trading "EX" the dividend: Monday, 2 June 2003
Record date: Friday, 6 June 2003
Date of payment: Monday, 9 June 2003
Share certificates may not be dematerialised
or rematerialised between Monday, 2 June 2003 and Friday, the 6 June 2003, both
dates inclusive.
T B Rutstein Dr S H Robertson M H Lotz
(Non-executive Chairman) (Chief Executive Officer) (Financial Director)
10 April 2003
Directors: T B Rutstein (Chairman), F E Emary (deputy Chairman),
Dr S H Robertson (Chief Executive Officer), J C Farrant,
M H Lotz (Financial Director), Dr J M Matsipa and J A Sherry.
Registered office:
Woodmead Park
8 Saddle Drive
Woodmead 2157
Transfer secretaries:
Ultra Registrars (Pty) Limited
11 Diagonal Street
Johannesburg 2001
Further details can be found on our website www.jasco.co.za
