| Wed 15 Oct 2003, 12:25 | | Interim Results for the six months ended 31 Aug 03 |
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Jasco Electronics Holdings Limited - Unaudited Interim Results for the six
months ended 31 August 2003
Jasco Electronics Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/003293/06)
Share Code : JSC ISIN: ZAE000003794
Website : www.jasco.co.za
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2003
# Operating profit before interest declined by 64,5%
# Headline loss of 2,8* cents per share
# Cash generated from operating activities increased by 36,1%
# All core operating divisions profitable
(* Excludes the benefits derived from recognising a deferred tax asset)
SUMMARISED CONSOLIDATED INCOME STATEMENT (R"000s)
6 Months ended Year
ended
31 August 28
February
2003 2002 2003
Note Unaudited Unaudited Audited
Revenue 126 638 141 622 307 265
- from continuing operations 121 885 127 238 284 426
- from discontinuing operations 4 753 14 384 22 839
Operating profit before : 3 506 10 536 29 401
- Net profit/(loss) on foreign 110 (361) (5 083)
exchange
- Net finance costs (4 218) (1 563) (3 962)
Operating (loss)/profit (602) 8 612 20 356
- from continuing operations 2 757 8 654 20 996
- from discontinuing operations (3 359) (42) (640)
- Exceptional items (3 169) 1 039 126
Net (loss)/profit before taxation (3 771) 9 651 20 482
Taxation (298) - (7 947)
Net (loss)/profit after taxation (3 473) 9 651 28 429
Loss from associated company (1 325) - -
Net (loss)/profit attributable to (4 798) 9 651 28 429
ordinary shareholders
Reconciliation of headline
earnings
Net (loss)/profit attributable to (4 798) 9 651 28 429
ordinary shareholders
Adjusted for exceptional items - (3 169) 1 039 126
Profit on disposal of subsidiary - 1 994 1 994
Amortisation and impairment of (2 528) (955) (1 799)
goodwill
(Loss)/profit in discontinuing of (641) - 209
operations
Loss on disposal of business - - (278)
operations
Headline (loss)/earnings (1 629) 8 612 28 303
Number of shares in issue (000"s) 69 431 48 812 48 812
Number of shares on which earnings
per share is calculated (000"s) 69 431 48 812 48 812
Number of shares on which diluted
earnings
per share is calculated (000"s) 2 99 316 - -
Ratio analysis including the
benefit derived from recognising
the deferred tax asset
Attributable (loss)/profit (4 798) 9 651 28 429
(Loss)/profit per share (cents) (6,9) 19,8 58,2
Diluted (loss)/profit per share 2 (4,8) - -
(cents)
Headline (loss)/earnings per share (2,3) 17,6 58,0
(cents)
Diluted headline (loss)/earnings 2 (1,6) - -
per share (cents)
EBITDA 3 716 13 648 29 563
Net asset value per share (cents) 111,4 81,4 111,6
Net tangible asset value per share 52,6 54,2 89,5
(cents)
Dividend per share - Interim - 5 5
(cents)
- - - 6
Final (cents)
Debt : Equity (%) 28,6 6,2 -
Ratio analysis excluding the
benefit derived from recognising
the deferred tax asset
Attributable (loss)/profit (5 096) 9 651 20 482
(Loss)/profit per share (cents) (7,3) 19,8 42,0
Diluted (loss)/profit per share 2 (5,1) - -
(cents)
Headline (loss)/earnings per share (2,8) 17,6 41,7
(cents)
Diluted headline (loss)/earnings 2 (1,9) - -
per share (cents)
EBITDA 3 716 13 648 29 563
Net asset value per share (cents) 91,9 81,4 95,3
Net tangible asset value per share 33,1 54,2 73,2
(cents)
Dividend per share - Interim - 5 5
(cents)
- - - 6
Final (cents)
Debt : Equity (%) 34,7 6,2 -
Notes
1. This interim report is prepared on the historical cost basis and incorporate
accounting policies which conform with the South African Statements of Generally
Accepted Accounting Practice and the requirements of the South African Companies
Act. These policies are consistent with those applied in the previous financial
year.
2. These shares relate to our recent BEE acquisition of Tasslelane (Pty) Ltd
from Community Investment Holdings (Pty) Ltd and will only be issued in 2008,
provided certain profit targets have been met.
SUMMARISED CONSOLIDATED BALANCE SHEET (R"000s)
Unaudited Unaudited Audited
31 August 31 August 28
February
Note 2003 2002 2003
ASSETS
Non-current assets 70 596 26 945 38 346
Plant and equipment 12 476 8 671 11 007
Intangibles 40 802 13 286 10 792
Investments 966 - -
Deferred tax asset 13 538 - 7 947
Loans 2 814 4 988 8 600
Current assets 84 280 123 265 97 688
Inventories 29 486 26 587 27 933
Accounts receivable 52 436 49 841 67 026
Cash on hand 2 358 46 837 2 729
Total assets 154 876 150 210 136 034
EQUITY AND LIABILITIES
Shareholders" funds 77 314 39 749 54 456
Non-current interest bearing 437 51 597
liabilities
Current liabilities 77 125 110 410 80 981
Interest bearing liabilities 1 24 030 49 247 1 683
Non-interest bearing liabilities 53 095 61 163 79 298
Total equity and liabilities 154 876 150 210 136 034
1. The increase in the interest bearing liabilities results from assuming the
net liabilities of Khululeka Telecommunications (Pty) Ltd in terms of a
suretyship in favour of Khululeka"s bank. (See Introduction) The loss was
increased by 2,4 cents per share due to the increase in interest paid.
2. The contingent liabilities pertaining to the judgement against one of our
dormant subsidiaries and the possible claim for a collapsed structure has
remained unchanged since reported in the 2003 annual financial statements. The
claim for work done by a sub-contractor in Botswana remains, but as the
directors believe the possibility of a claim against Jasco is remote, the
provision of R450 000 was reversed.
STATEMENT OF CHANGES IN EQUITY (R"000s)
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended
31 August 31 August 28
February
2003 2002 2003
Opening balance 54 456 30 098 30 098
Attributable (loss)/profit (4 798) 9 651 28 429
Dividends paid (2 872) - (2 440)
Net shares issued/(acquired) 31 000 - (1 650)
(Loss)/profit on translation of (472) - 19
foreign subsidiary
77 314 39 749 54 456
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT (R"000s)
Unaudited Unaudited Audited
6 months 6 months year ended
ended ended
31 August 31 August 28
February
2003 2002 2003
Cash generated from operations 14 461 7 468 22 744
Net finance costs (4 218) (1 563) (3 962)
Taxation paid - (488) (630)
Dividends paid (2 872) - (2 440)
Cash flow from operating 7 371 5 417 15 712
activities
Cash flow from investing (29 929) 36 1 771
activities
Cash flow from financing (144) 7 153 (1 137)
activities
(Decrease)/increase in cash (22 702) 12 606 16 346
resources
Cash and cash equivalents at 1 330 (15 016) (15 016)
beginning of period
Cash and cash equivalents at end (21 372) (2 410) 1 330
of period
SUMMARISED SEGMENTAL REPORT (OPERATING DIVISIONS ONLY) FOR THE SIX MONTHS ENDED
31 AUGUST 2003, 31 AUGUST 2002 AND THE YEAR ENDED 28 FEBRUARY 2003(R"000s)
Telecoms Manufacturing Security Other
division division division (discontinued)
31 August 2003 (Unaudited) R"000s R"000s R"000s R"000s
Revenue 72 760 28 206 18 855 4 753
Operating profit* 4 909 3 302 1 475 (3 359)
31 August 2002 (Unaudited)
Revenue 88 887 27 588 8 385 14 384
Operating profit* 11 699 4 024 (1 284) (42)
28 February 2003 (Audited)
Revenue 201 003 60 560 22 030 22 839
Operating profit* 21 845 11 387 1 378 (640)
*Operating profit is stated before adjusting for inter-group
interest and administration fees.
INTRODUCTION
Results for the period to 31 August 2003 were impacted by the strong Rand and
delays in the take-up of orders in the telecommunications division.
In the 2003 Annual Report and the trading update of 2 July 2003, Jasco indicated
the sensitivity of its earnings to the foreign exchange rates and
telecommunication order inflows. Jasco derived more than 40% of its revenue from
exports during the interim period and the continuing strengthening of the Rand
impacted on turnover and operating margin. This was exacerbated by a delay in
take-up orders from certain local customers of the Telecommunications division.
In the Annual Report, Jasco also reported that it had acquired Khululeka
Telecommunications (Pty) Ltd with effect from 1 March 2003. This increased
gearing to 34,7%* (2002: 6,2%) due to the assumed net liability of the
operation.
RESULTS
Revenue decreased by 10,6% to R126,6 million (2002: R141,6 million) and
operating profit before interest decreased by 64,5% to R3,6 million (2002: R10,2
million).
Higher interest charges, mainly due to the abovementioned increased gearing, a
R3,4 million loss from discontinued operations and a R1,3m loss from an
associated company BRJ, resulted in a headline loss of 2,8* cents per share
(2002: profit of 17,6 cents per share).
Despite the headline loss, cash flow from operating activities increased by
36,1% to R7,4 million (2002: R5,4 million) due to good working capital
management and the implementation of operational efficiencies.
OPERATIONAL REVIEW
The core operating divisions are profitable and cash generative.
TELECOMMUNICATIONS
Telecommunications focuses on the provision of specialised solutions, products
and services to telecommunications networks. A number of products, designed and
manufactured in-house, are combined with a range of selected products sourced on
an exclusive basis from leading overseas suppliers.
This division, which derived 50% of its turnover from exports during the period
under review, was the most severely affected by the strong Rand. This, combined
with a sharp decline in the take-up of orders due to delays in
telecommunications rollouts and the awarding of telecommunication licenses
locally and in Africa, resulted in a 18,1% reduction in gross revenue to R72,8
million (2002: R88,9 million), representing 57,5% of group revenue. Performance
was further impacted by the material (25%) increase in the local price of steel
which is used to manufacture telecommunications masts and towers.
These factors halved the operating margin to 6,7% (2002: 13,2%).
Although turnover and margins were affected by the strengthening of the Rand,
actual exports grew strongly. Measures to improve operational efficiencies have
also been put in place.
MANUFACTURING
This division manufactures a number of in-house products and focuses on
component manufacture for the electrical and electronics industries.
Revenue increased by 2,2% to R28,2 million (2002: R27,6 million), contributing
22,3% of group revenue. Exports in this division represent a smaller percentage
(14%) of revenue than those in the Telecommunications division, although the
strengthening of the Rand reduced operating margin by 19,9% to 11,7% (2002:
14,6%).
Demand for electronic components from manufacturers of domestic appliances in
the local market was dampened by high interest rates in the first half of the
year, although this has started to improve following rate cuts.
SECURITY
Security focuses on the development, supply and integration of customised
surveillance and other security systems. The client base includes mines,
financial institutions, government and municipalities.
The division embarked on a turnaround strategy in the latter part of 2002. As a
result, the division increased revenue, albeit off a low base, by 124,9% to
R18,9 million (2002: R8,4 million). This contributed 14,9% to group revenue and
resulted in a turnaround from last year"s interim loss of R1,3 million to a
profit of R1,5 million for the six-month period which also improved the
operating margin to 7.8%.
With the ongoing need for increased security and the group"s strong BEE
credentials, the Security division is expected to continue to grow during this
financial year.
DISCONTINUED OPERATIONS
The success of Jasco"s strategy of exiting low-margin, non-core businesses has
strengthened the group"s resolve to critically examine under-performing
operations and to exit such businesses as soon as it becomes clear that
performance criteria will not be met.
In this regard, the group decided to discontinue the Alro operation in Khululeka
Telecommunications, and its telecommunications network building activities which
were conducted through Jascotel and a strategic partnership with the Baran
Group, BRJ. These operations were unable to attain critical mass and incurred
losses of R0,8 million, R2,6 million and R1,3 million, respectively (the latter
being reflected as an associated company loss).
BLACK ECONOMIC EMPOWERMENT (BEE)
The acquisition of Tasslelane during 2003 has increased Jasco"s offering and
services. Unfortunately, the acquisition coincided with delays in
telecommunication expenditure, as mentioned above. Nevertheless, other divisions
within Jasco have already benefited from the group"s BEE status and a number of
new opportunities, not previously available to Jasco, are being investigated.
In addition, the group"s new status and profile as a listed BEE company has
placed Jasco in a key position to benefit from the proposed BEE charters and
initiatives in the mining, financial and information and communication
technology (ICT) sectors.
PROSPECTS
Although the Rand remains strong, orders from local and African
telecommunications projects are starting to pick up and all divisions are likely
to remain profitable at operational level. In addition, a number of measures to
improve efficiencies in the manufacturing of export products are being
implemented.
With further reductions in interest rates expected, the interest paid should be
significantly reduced in future. As no further material losses will be incurred
from discontinued operations, cash generation is expected to continue, which
will further reduce gearing.
The solidity and diversity of Jasco"s core operations following a focused three-
year restructuring programme and the closure of loss-making operations have been
further boosted by Jasco"s strong BEE profile. Management and directors believe
that the potential benefits of this have not yet been fully realised and the
company is well poised to take advantage of any upturn in future business.
In light of this and the fact that Jasco"s second half is traditionally better
than the first, management expects, in the absence of any unforeseen
circumstances, to end the year profitably.
BOARD CHANGES
Following the approval by shareholders and the completion of all the remaining
conditions precedent of the acquisition of Tasslelane Investments (Pty) Ltd from
Community Investment Holdings (Pty) Ltd, Dr A T M Mokgokong and Messrs M J
Madungandaba and S D C Masuku were appointed as directors of Jasco with effect
from the 26 June 2003.
Subsequently, S D C Masuku accepted a partnership at PriceWaterhouseCoopers and
resigned as a non-executive director, effective 1 October 2003. Patrick S.
Chapwanya CA (SA) was appointed to the Board as a non-executive director and
will also serve on the audit committee.
DIVIDEND
Jasco"s dividend policy is to declare a final dividend. In the light of this and
the losses incurred at interims, the directors have resolved not to pay an
interim dividend.
Dr A T M MOKGOKONG Dr S H ROBERTSON M H LOTZ
(Non-Executive Chairperson) (Chief Executive Officer) (Financial Director)
15th October 2003
Directors: Dr A T M Mokgokong (Chairperson), T B Rutstein (Deputy Chair)
P S Chapwanya#, F E Emary, J C Farrant, Dr J M Matsipa, J A Sherry
(Non-Executives)
Dr S H Robertson (CEO), M H Lotz (FD), M J Madungandaba (Marketing)
# (Zimbabwean)
Registered office: Transfer secretaries:
Woodmead Park Ultra Registrars (Pty) Limited
8 Saddle Drive 11 Diagonal Street
Woodmead 2157 Johannesburg 2001
Further details can be found on our website www.jasco.co.za
Date: 15/10/2003 12:15:11 PM Produced by the JSE SENS Department
