| Tue 20 Apr 2004, 9:39 | | Reviewed Results For The Year Ended 29 |
|
Jasco Electronics Holdings Limited - Reviewed Results For The Year Ended 29
February 2004 And Withdrawal Of Cautionary Announcement
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
REVIEWED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2004 AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
- Revenue decreased by 15,9% to R258,5 million
- EBITDA declined by 55,3% to R13,2 million
- Headline earnings decreased by 90% to 4,2* cents per share
- All core operating divisions profitable
- Cash flow from operating activities 21,8 cents per share
- Gearing below 27%*
(*Excludes the benefits derived from recognising a deferred tax asset and a
provision for a liability which is no longer required)
SUMMARISED CONSOLIDATED INCOME STATEMENTS
for the year ended 29 February 2004 Reviewed Audited
29 February 28 February %
(R"000) Notes 2004 2003 change
Revenue 258 543 307 265 -15,9%
- from continuing operations 252 524 238 911 5,7%
- from discontinuing operations 6 019 68 354 -91,2%
Operating profit before interest 11 320 24 318 -53,5%
Net interest paid (6 133) (3 962) 54,8%
Operating profit 5 187 20 356
- from continuing operations 9 756 20 698 -52,9%
- from discontinuing operations (4 569) (342)
Provision for liability no
longer required 1 17 100 -
Exceptional items (22 144) 126
Net profit before taxation 143 20 482 -99,3%
Taxation (3 327) (7 947)
Net profit after taxation 3 470 28 429 -87,8%
Loss from associated company (2 251) -
Net income attributable to
ordinary shareholders 1 219 28 429 -95,7%
Reconciliation of headline earnings
Net income attributable to
ordinary shareholders 1 219 28 429 -95,7%
Adjusted for exceptional items 22 144 (126)
- impairment of goodwill 1 17 100 -
- profit on disposal of subsidiary - (1 994)
- amortisation and impairment
of intangibles 5 044 1 799
- loss on disposal of business operations - 278
- profit from discontinuing of operations - (209)
Headline earnings 23 363 28 303 -17,5%
Further adjusted for (20 427) (7 947)
- provision for liability no
longer required 1 (17 100) -
- taxation (3 327) (7 947)
Comparative headline earnings 2 936 20 356
Number of shares in issue ("000) 69 431 48 512
Number of shares on which earnings
per share is calculated ("000) 69 431 48 512
Number of shares on which
diluted earnings per share
is calculated ("000) 2 99 316
Ratio analysis
Earnings per share (cents) 1,8 58,6 -97,0%
Diluted earnings per share (cents) 1,2
Headline earnings per share (cents) 1 33,6 58,3 -42,3%
Diluted headline earnings
per share (cents) 2 23,5
EBITDA 13 222 29 563 -55,3%
Net asset value per share (cents) 119,6 112,3 6,5%
Net tangible asset value per share (cents) 64,6 90,0 -28,3%
Dividend per share - Interim (cents) - 5
- Final (cents) - 6
Debt: Equity 21,3% 0%
Ratio analysis excluding the benefit derived from recognising the deferred tax
asset and the provision for a liability no longer required
Comparative headline earnings
per share (cents) 1 4,2 42,0 -89,9%
Diluted comparative headline
earnings per share (cents) 2 3,0
EBITDA 13 222 29 563 -55,3%
Net asset value per share (cents) 95,7 95,9 -0,2%
Net tangible asset value per share (cents) 40,7 73,6 -44,7%
Dividend per share - Interim (cents) - 5
- Final (cents) - 6
Debt:Equity 26,6% 0%
Notes:
1. The provision for liability no longer required and the impairment of
goodwill relates to the acquisition of the remaining 80% shareholding in
Khululeka Telecommunications (Pty) Ltd. Further details are given in the
paragraph entitled Accounting policies and comparative headline earnings.
2. These shares relate to our BEE acquisition of Tasslelane (Pty) Ltd from
Community Investment Holdings (Pty) Ltd and will only be issued in March 2008,
provided certain profit targets have been met.
3. Please note that in terms of GAAP, the revenues and operating profits for
2003 have been adjusted to take into account the discontinuance of the Jascotel
operation after the 2003 year end.
Summarised consolidated balance sheets
at 29 February 2004 Reviewed Audited
29 February 28 February
(R"000) Notes 2004 2003
ASSETS
Non-current assets 68 178 38 346
Plant and equipment 11 174 11 007
Intangibles 38 201 10 792
Deferred tax asset 16 567 7 947
Loans 2 236 8 600
Current assets 79 040 97 688
Inventories 22 229 27 933
Accounts receivable 54 211 66 747
Prepayments - 279
Cash on hand 2 600 2 729
Total assets 147 218 136 034
EQUITY AND LIABILITIES
Ordinary share capital and reserves 83 025 54 456
Non-current liabilities 590 597
Interest bearing liabilities 291 597
Non-interest bearing liabilities 299 -
Current liabilities 63 603 80 981
Interest bearing liabilities 1 17 380 1 683
Non-interest bearing liabilities 46 223 79 298
Total equity and liabilities 147 218 136 034
Notes:
1. The increase in the interest bearing liabilities resulted from assuming the
net liabilities of Khululeka Telecommunications (Pty) Ltd in terms of a surety
in favour of Khululeka"s bankers.
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.
Statements of changes in equity
for the year ended 29 February 2004 29 February 28 February
(R"000) 2004 2003
Opening balance 54 456 30 098
Attributable income 1 219 28 429
Dividends paid (2 911) (2 440)
Net shares issued/(acquired) 30 617 (1 650)
Currency translation differences (356) 19
Closing balance 83 025 54 456
Summarised consolidated cash flow statements
for the year ended 29 February 2004 29 February 28 February
(R"000) 2004 2003
Cash generated from operations 24 349 22 744
Net financing costs (6 133) (3 962)
Net taxation paid (191) (630)
Dividends paid (2 911) (2 440)
Cash flow from operating activities 15 114 15 712
Cash flow from investing activities (26 079) 1 771
Cash flow from financing activities (4 786) (1 137)
(Decrease)/increase in cash resources (15 751) 16 346
Summarised segmental reports
for the year ended 29 February 2004
(Operating divisions only)
(R"000) Telecoms Manuf. Security
2004 Division Division Division Discont.
Revenue 154 640 62 419 31 351 6 019
Operating profit/(loss)* 12 178 9 452 983 (3 313)
2003
Revenue 155 488 60 560 22 030 68 354
Operating profit* 20 944 9 197 1 211 571
*Operating profit excludes interest paid or received and is stated before making
adjustments for inter-group interest and administration fees.
Introduction
The results for the year ended 29 February 2004 were disappointing.
The results were negatively impacted by a delay in the take-up of orders in the
Telecommunications and Security divisions and losses in discontinued operations.
The stronger Rand also had a negative influence on both turnover and margins.
The assumption of an overdraft from a previous investment, Khululeka
Telecommunications (Pty) Ltd (Khululeka), at the end of the 2003 financial year
increased the gearing ratio and the amount of interest paid on borrowings.
Although the results were not satisfactory, the conversion of the headline loss
of 2,8* cents per share in the first half to a headline profit of 4,2* cents per
share for the year as a whole and operating profit before interest in the second
half of the year of R7,7 million compared to R3,6 million at the interim stage,
indicate an encouraging turnaround in the second half of the year.
Accounting policies and comparative headline earnings
This report was prepared using accounting policies that are in accordance with
the Statements of Generally Accepted Accounting Practice and comply to AC127.
These policies are consistent with those applied in the financial statements for
the year ended 28 February 2003.
As reported in the 2003 Annual Report, Jasco decided to acquire the 80%
shareholding it did not already own in Khululeka. The acquisition required Jasco
to absorb the overdraft of R24,0 million which had been granted to Khululeka.
Although this liability was already fully provided for by Jasco and accordingly
had no impact on the net asset value per Jasco share, the absorption of the
overdraft did have an impact on the amount of Jasco"s interest-bearing debt. It
also affected the reporting of headline earnings as follows:
- The net liability of R17,1 million raised in previous years to cover the
overdraft in Khululeka was reversed when this overdraft was taken over by Jasco;
and
- The closure of the Alro operation in Khululeka resulted in an impairment of
the R17,1 million of goodwill.
In terms of AC306, Circular 7/2002 and the JSE Securities Exchange South Africa
Listings requirements, the former reversal of the provision for the liability
forms part of headline earnings, whereas the latter impairment of goodwill does
not. This is reflected as such in the income statement.
However, in the interest of showing headline earnings and ratios which are
comparable with those shown in the past, the headline earnings have been further
adjusted by adding back the provision for a liability no longer required and the
deferred tax asset of R3,3 million raised. All numbers affected by this are
clearly marked with an asterisk* throughout this commentary.
Results
Revenue decreased by 15,9% to R258,5 million (2003: R307,3 million) and
operating profit before interest decreased by 53,5% to R11,3 million (2003:
R24,3 million). Operating margin from continuing operations, excluding interest,
was reduced to 9,1% (2003: 13,2%). The forex translation losses incurred during
2003 (R5,1 million) were eliminated in 2004 as a result of a strategic decision,
taken in the face of a volatile Rand, to cover both imports and exports.
However, the strong Rand still negatively impacted turnover and profits as 34,3%
of revenue was derived from exports during this period.
Besides the delay in the take-up of orders in the Telecommunications and
Security divisions and the strong Rand, profits were further impacted by:
- Higher interest charges due to the increase in interest bearing debt as a
result of taking on the Khululeka overdraft in March 2003;
- A R4,6 million loss from discontinued operations; and
- A R2,25 million loss from associated company BRJ (which has subsequently
also been discontinued)
These issues resulted in a reduced headline profit of 4,2* cents per share
(2003: 42,0* cents per share).
Despite the lower operating profits for the year, sound working capital
management resulted in R15,1 million of cash being generated from operating
activities, which equates to 21,8 cents per share. This reduced gearing to
26,6%* which represents a 23% reduction in the six months since interim results
(August 2003; 34,7%*).
Operational review
The core operating divisions are profitable and cash generative.
Telecommunications
The Telecommunications division 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
strategic products sourced on an exclusive basis from leading overseas
suppliers.
This division consists of two operations, namely Webb Industries, which has been
in operation for over 30 years, and the more recently established Telesciences.
Revenue for the Telecommunications division reduced by 0,5% to R154,6 million
(2003: R155,5 million). Operating margin reduced by 41,5% to 7,9% (2003: 13,5%).
This division produced 53,9% of group operating profit from continuing
operations.
Webb Industries, which derived 54% of its turnover from exports during the year
under review, was the most severely affected by the strong Rand. Performance was
further impacted by the material increase in the local price of steel, which is
used to manufacture telecommunications masts and towers.
Although turnover and margins were affected by the strengthening of the
currency, export volumes continued to grow, especially the sale of locally
designed and manufactured antennas that are used worldwide in asset tracking
applications. Measures to improve operational efficiencies have also been put in
place.
This operation remains a consistent and well established contributor to profits
which, combined with improved prospects for wireless telecommunications
throughout Africa and the ongoing need for asset tracking, bode well for future
prospects.
The Telesciences operation, which includes the Khululeka and Tasslelane
acquisitions made during 2003, suffered from a deferral of orders due to
continued delays in telecommunications rollouts and the awarding of
telecommunication licenses locally and in the rest of Africa. As the operation
requires highly skilled and qualified personnel, the reduced sales were
insufficient to cover overheads and the operation ended the year with a loss.
However, this operation has recently been shortlisted for a number of tenders,
the awarding of which will result in a return to profitability.
Manufacturing
This division manufactures a number of in-house products and focuses on
component manufacture for the electrical and electronics industries.
Revenue increased by 3,1% to R62,4 million (2003: R60,6 million) and operating
margins remained unchanged at a satisfactory 15,2%. This division produced 41,8%
of group operating profit derived from continuing operations.
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, but improved during the balance of the year following rate cuts and
increased consumer expenditures. The growth in both local sales and exports (to
the EU, USA and South America) of Jasco"s Just-ChlorRegistered pool chlorinator
remained particularly strong.
The ongoing positive outlook for consumer demand and continued expansion of
electrification projects both locally and in other parts of Africa, places this
division in a strong position for future growth.
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. The
initial success of this turnaround and a continued demand for security solutions
resulted in management further strengthening the team through the appointment of
highly skilled personnel. The resultant 25% increase in expenses was offset by
increasing revenues by 42,3% to R31,4 million (2003: R22,0 million). However,
this was insufficient to provide growth in profits this year and the division
contributed a decreased operating profit of R1,0 million (2003; R1,3 million),
producing 4,3% of group operating profit from continuing operations.
With a strong team now in place, good orders on hand, the ongoing need for
increased security in South Africa and Jasco"s strong BEE credentials, the
Security division is expected to grow profits significantly during the new
financial year.
Discontinued operations
The revenue attributable to discontinued operations relates to the closure of
the Alro operation in Khululeka and both of the telecommunications network
building activities that 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 R0,9 million, R3,7 million and R2,25
million, respectively (the latter being reflected as an associated company loss)
and were consequently discontinued during this year. As a result, no further
material losses will be incurred from these operations in future.
Prospects
Jasco"s established and diversified core operating divisions have recovered from
the initial setback of the strong Rand and the lack of telecommunications orders
in the first half of the year to deliver accelerated growth in the second half.
To maintain such momentum, a focused effort on improving manufacturing and sales
efficiencies in the core operating divisions has been put in place.
The profits generated from the continuing operating divisions, together with
good working capital management, generated operating cash of 21,8 cents per
share. As no further material losses will be incurred from discontinued
operations, cash generation from ongoing operations is expected to continue
reducing gearing and interest charges.
Although the acquisition of BEE company Tasslelane has not yet achieved the
required results, it has improved the group"s status and profile as a listed BEE
company. As a result, Jasco has been able to tender for a number of new business
opportunities.
In addition, a recent "BBB" rating by EmpowerDEX (an independent economic
empowerment rating agency) confirms Jasco"s broad based empowerment credentials
as measured by the balanced scorecard approach. This has placed Jasco in a key
position to benefit from the proposed BEE charters and initiatives in the
mining, financial and especially in the information and communication technology
(ICT) sectors.
Management and directors believe that the potential benefits of all of these
factors have not yet been fully realised and that the company is well poised to
take advantage of an expected upturn in future business.
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
Jasco"s dividend policy is to declare a final dividend. However in the light of
this year"s results, the directors have resolved not to declare a dividend this
year.
Withdrawal of cautionary announcement
Shareholders are referred to the Trading Statement and Cautionary Announcement
published on the 3rd February 2004 and are advised that, as a result of this
announcement, they need no longer exercise caution in dealing in their Jasco
shares.
Dr A T M Mokgokong Dr S H Robertson M H Lotz
(Non-Executive Chairperson) (Chief Executive Officer) (Financial Director)
20 April 2004
Directors
Dr ATM Mokgokong (Chairperson), TB Rutstein (Deputy Chair), PS Chapwanya+, FE
Emary, JC Farrant, Dr JM Matsipa, JA Sherry (Non-Executives)
Dr SH Robertson (CEO), MH Lotz (FD), MJ Madungandaba (Marketing) +
(Zimbabwean)
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
(*Excludes the benefits derived from recognising a deferred tax asset and a
provision for a liability which is no longer required)
Date: 20/04/2004 09:30:10 AM Produced by the JSE SENS Department
