| Thu 7 Oct 2004, 9:24 | | INTERIM RESULTS |
|
JASCO ELECTRONICS HOLDINGS LIMITED - UNAUDITED INTERIM RESULTS FOR THE SIX
MONTHS ENDED 31 AUGUST 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
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2004 AND WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT
Revenue maintained, Operating profit before interest increased by 157%,
EBITDA increased by 181% to R10,5 million, Headline earnings per share of 7,4
cents, Steady cash flows reduce gearing below 17%
Summarised consolidated income statement
Unaudited Audited
6 months ended Year ended
31 August 29 February
(R`000) Note 2004 2003 2004
Revenue 122 014 126 638 258 543
- from continuing operations 121 946 121 885 252 648
- from discontinuing operations 68 4 753 5 895
Operating profit before interest 9 285 3 616 11 320
Net interest paid (1 895) (4 218) (6 133)
Operating profit/(loss) 7 390 (602) 5 187
- from continuing operations 7 597 2 757 9 888
- from discontinuing operations (207) (3 359) (4 701)
Provision for liability no longer required 1 - - 17 100
Exceptional items (2 522) (3 169) (22 144)
Net profit/(loss) before taxation 4 868 (3 771) 143
Taxation (2 217) 298 3 327
Net profit/(loss) after taxation 2 651 (3 473) 3 470
Loss from associated company (31) (1 325) (2 251)
Net income/(loss) attributable
to ordinary shareholders 2 620 (4 798) 1 219
Reconciliation of headline earnings
Net income/(loss) attributable
to ordinary shareholders 2 620 (4 798) 1 219
Adjusted for exceptional items 2 522 3 169 22 144
- impairment of goodwill 1 - - 17 100
- amortisation of intangibles 2 522 2 528 5 044
- loss in discontinuing of operations - 641 0
Headline earnings/(loss) 5 142 (1 629) 23 363
Further adjusted for 2 217 (298) (20 427)
- provision for liability no
longer required 1 - - (17 100)
- taxation 2 217 (298) (3 327)
Comparative headline earnings/(loss) 7 359 (1 927) 2 936
Number of shares in issue (`000) 69 431 69 431 69 431
Number of shares on which earnings
per share is calculated (`000) 69 431 69 431 69 431
Number of shares on which diluted
earnings per share is calculated (`000) 2 99 316 99 316 99 316
Ratio analysis
Earnings/(loss) per share (cents) 3,8 (6,9) 1,8
Diluted earnings/(loss) per share (cents) 2 2,6 (4,8) 1,2
Headline earnings/(loss) per share (cents) 1 7,4 (2,3) 33,6
Diluted headline earnings/
(loss) per share (cents) 2 5,2 (1,6) 23,5
EBITDA 10 453 3 716 13 222
Net asset value per share (cents) 123,4 111,4 119,6
Net tangible asset value per share (cents) 72,0 52,6 64,6
Debt:Equity (%) 13,7 28,6 21,3
Interest cover (times) 4,9 0,9 1,8
Ratio analysis (excluding the effects derived from recognising the deferred tax
asset and a provision for a liability no longer required)
Comparative headline earnings/
(loss) per share (cents) 1 10,6 (2,8) 4,2
Diluted comparative headline
earnings/(loss) per share (cents) 2 7,4 (1,9) 3,0
EBITDA 10 453 3 716 13 222
Net asset value per share (cents) 102,7 91,9 95,7
Net tangible asset value per share (cents) 51,4 33,1 40,7
Debt:Equity (%) 16,4 34,7 26,6
Interest cover (times) 4,9 0,9 1,8
Notes: 1. The provision for liability no longer required and the impairment of
goodwill relates to an acquisition made in the prior year. 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.
Summarised consolidated balance sheet
Unaudited Audited
31 August 29 February
(R`000) 2004 2003 2004
Assets
Non-current assets 61 543 69 508 67 090
Plant and Equipment 10 680 12 476 11 174
Intangibles 35 679 40 802 38 201
Investments 0 966 0
Deferred tax asset 14 350 13 538 16 567
Loans 834 1 726 1 148
Current assets 85 953 85 368 80 128
Inventories 26 255 29 486 22 229
Accounts Receivable 57 098 53 524 55 299
Cash on hand 2 600 2 358 2 600
Total assets 147 496 154 876 147 218
Equity and Liabilities
Ordinary share capital and reserves 85 689 77 314 83 025
Non-current liabilities 434 437 590
Interest bearing liabilities 135 437 291
Non-interest bearing liabilities 299 0 299
Current liabilities 61 373 77 125 63 603
Interest bearing liabilities 14 175 24 030 17 380
Non-interest bearing liabilities 47 198 53 095 46 223
Total equity and liabilities 147 496 154 876 147 218
Notes: 1. The contingent liabilities pertaining to the work done by a sub-
contractor in Botswana, the judgement against one of our dormant subsidiaries
and the possible claim for a collapsed structure has remained unchanged since
reported in the 2004 annual financial statements.
2. Capital commitments, committed and authorised, of R750 000 (2003: Nil) will
be financed from operations.
Statement of change in equity
Unaudited Audited
6 months ended Year ended
31 August 29 February
(R`000) 2004 2003 2004
Opening balance 83 025 54 456 54 456
Attributable income/(loss) 2 620 (4 798) 1 219
Dividends paid 0 (2 872) (2 911)
Net shares issued 0 31 000 30 617
Currency translation differences 44 (472) (356)
Closing balance 85 689 77 314 83 025
Summarised consolidated cash flow statement
Unaudited Audited
6 months ended Year ended
31 August 29 February
(R`000) 2004 2003 2004
Cash generated from operations 5 821 14 461 24 349
Net financing costs (1 895) (4 218) (6 133)
Net taxation paid - - (191)
Dividends paid - (2 872) (2 911)
Cash flow from operating activities 3 926 7 371 15 114
Cash flow from investing activities (705) (29 929) (26 080)
Cash flow from financing activities (16) (144) (4 786)
Increase/(decrease) in cash resources 3 205 (22 702) (15 752)
Summarised segmental report
for the six months ended 31 August 2004, 31 August 2003 and the year ended 29
February 2004 (Operating divisions only)
(R`000) Telecoms Manuf. Security Discont.
31 August 2004 (Unaudited) division division division
Revenue 72 767 33 785 14 512 68
Operating profit + 8 966 4 089 36 (207)
31 August 2003 (Unaudited)
Revenue 72 760 28 206 18 855 4 753
Operating profit + 5 281 3 035 1 317 (2 666)
29 February 2004 (Audited)
Revenue 154 640 62 419 31 351 6 019
Operating profit + 12 178 9 452 983 (3 313)
+ 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 six months ended 31 August 2004 reflect the ongoing
turnaround in Jasco`s profitability from the loss posted at the interim stage
last year and the small operating profit reported at the February 2004 year end.
Earnings increased due to an improvement in manufacturing and sales efficiencies
in the core operating divisions. The increase in operating margins resulted in
headline earnings of R5,1 million against the R1,6 million loss at interims last
year. The balance sheet was further strengthened by the increase in net asset
value and a 52,1% reduction in the debt:equity ratio.
Both the Telecommunications and Manufacturing divisions performed well.
Telecommunications benefited from improved trading conditions, while
Manufacturing`s output grew as a result of buoyant consumer demand for domestic
appliances.
The Security division addressed muted sales in the first half to end the period
with good orders on hand and improved prospects for the remainder 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 with AC127.
These policies are consistent with those applied in the financial statements for
the year ended 29 February 2004, except for the consolidation of the Jasco
Employee Incentive Share Trust. This change is in line with the latest listings
requirements of the JSE Securities Exchange South Africa. The restated
comparatives have no material impact on the results under review.
As explained in the 2004 year-end results announcement and the 2004 Annual
Report, Jasco`s results should be read against the context of historic events
that affect the reporting of the group`s financials. In the interest of showing
comparable headline earnings and ratios with those shown in the past, the
concept of comparative headline earnings was introduced.
In line with this, headline earnings for the interim period have been further
adjusted by adding back the tax charge of R2,2 million resulting from the
reversal of a portion of the deferred tax asset. All numbers affected by this
are clearly marked with an asterisk* throughout this commentary.
Results
Revenue from continuing operations was maintained at R121,95 million (2003:
R121,89 million) with operating profit before interest increasing by 156,8% to
R9,3 million (2003: R3,6 million).
Notwithstanding the muted performance from the Security division, the operating
margin from continuing operations, excluding interest, increased to a
satisfactory 10,8% (2003: 8,0%). This resulted in headline earnings per share of
7,4 cents (2003: a loss of 2,3 cents). Excluding the effects of a deferred tax
asset, comparative headline earnings per share were 10,6* cents (2003: a loss of
2,8* cents).
Net asset value per share increased by 11,8%* to 102,7* cents and net tangible
asset value per share improved by 55,3%* to 51,4* cents per share. Sound working
capital management resulted in R5,8 million of cash generated from operations.
Subsequently, debt repayments resulted in a reduction in gearing by 52,7% to
16,4%* (2003: 34,7%*) and an increase in the interest cover to 4,9 times (2003:
0,9 times).
Operational review
The core operating divisions remained 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 was maintained at R72,8 million
(2003: R72,8 million). Operating margin increased to 12,3% (2003: 7,3%) due to
an improvement in manufacturing efficiencies and more optimal product mix. This
division produced 68,5% of operating profit from continuing operations.
Notwithstanding the strong Rand and the negative impact of rising local steel
prices on both exports and margins, Webb Industries remained a consistent and
well-established contributor to profits. During this period, 53% of Webb`s
turnover came from exports.
The Telesciences operation, which includes the Tasslelane acquisition made
during 2003, returned to profitability. This was mainly due to generally
improved trading conditions in the telecommunications industry and a focus on
continuously strengthening client relationships
The Tasslelane acquisition cemented Jasco`s empowerment credentials and enabled
Jasco to tender for work it could not do before. This, together with Jasco`s
expertise in wireless telecommunications, has resulted in an increase in orders
from the new local wireless operators for their network rollouts.
Going forward, this division is particularly well positioned to benefit from:
* the new liberalised telecommunications environment recently announced
by government;
* exports of locally designed and manufactured antennae that are used
worldwide in asset tracking applications; and
* the ongoing growth in wireless telecommunications throughout Africa.
Manufacturing
This division trades under the name of Special Cables. It manufactures a number
of in-house products and focuses on component manufacture for the electrical and
electronics industries.
Revenue increased by 19,8% to R33,8 million (2003: R28,2 million) on the back of
buoyant consumer demand for domestic appliances and automotives. This is
particularly pleasing as the major production output is traditionally seasonally
skewed towards increased consumer demand in December. The strong demand,
combined with a focus on production efficiencies, yielded materially better
operating margins in this division. This division produced 31,2% of operating
profit from continuing operations.
Demand for electronic components from manufacturers of domestic appliances in
the local market remains at record levels following local interest rate cuts and
increased consumer expenditures. The growth in exports to the EU, USA and South
America of Jasco`s Just-ChlorRegistered pool chlorinator continues.
Security
This division trades under the name of Multivid. It is a specialist security
systems house, providing stand-alone and integrated closed circuit television
(CCTV), access control and alarm monitoring systems. The operation focuses on
developing and providing full turnkey solutions engineered to meet customers`
specific requirements. The diversified client base includes mines, financial
institutions, retail, government and municipalities.
The division embarked on a turnaround strategy in the latter part of 2002. The
initial success of this turnaround was not extended during this period as
several large orders were unexpectedly delayed. Although revenue decreased by a
disappointing 23%, the division managed to produce a small profit.
However, subsequent to August, the concerted efforts on improving order inflows
have paid off with orders on hand currently standing at pleasing levels. The
completion of this work during the balance of the year and a strong focus on
reducing expenses should result in improved profitability for the Security
division by financial year end.
Prospects
As discussed in the above operational review, the benefits of our empowerment
transaction have started to flow through to the results and prospects in all
core operating divisions remain positive. Management and directors therefore
believe Jasco is well positioned to take advantage of an expected upturn in
future business flow.
Jasco`s second half is traditionally better than the first. Although off a low
base, the turnaround process across the business also continues to gather
momentum. In the absence of any unforeseen circumstances, management therefore
expects to end the year with a further improvement in results.
Dividend
Jasco`s dividend policy is to declare a final dividend at year end.
Withdrawal of cautionary announcement
Shareholders are referred to the Trading Statement and Cautionary Announcement
published on 10 August 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)
7 October 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)#
#(Executive directors)
+(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 effects derived from recognising a deferred tax asset)
