| Tue 19 Apr 2005, 9:20 | | Results For The Year Ended 28 Feb 05 |
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Jasco Electronics Holdings Limited - Reviewed Results For The Year Ended 28
February 2005
JASCO ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003293/06)
Share code: JSC ISIN: ZAE000003794
Reviewed results for the year ended 28 February 2005
Highlights
All operating divisions profitable
Operating profit before interest increased by 141%
EBITDA increased by 84% to R24,3 million
Cash flow from operating activities up by 49% to 32,4 cents per share
Comparative headline earnings up by 471%* to 24,0* cents per share
Annual dividend of 6,0 cents per share declared
(* Excludes the effects derived from recognising a deferred tax asset)
Summarised consolidated income statement
Reviewed Audited % Increase/
28 February 29 February (decrease)
(R`000) Note 2005 2004
Revenue 248 832 258 543 (3,8)
- from continuing operations 248 750 252 648 (1,5)
- from discontinuing operations 82 5 895
Operating profit before interest 15 132 6 276 141,1
Net interest paid (3 268) (6 133) (46,7)
Operating profit 11 864 143
- from continuing operations 13 413 4 844 176,9
- from discontinuing operations (1 549) (4 701)
Taxation 5 629 (3 327)
Net profit after taxation 6 235 3 470 79,7
Loss from associated company - (2 251)
Net income attributable to
ordinary shareholders 6 235 1 219 411,5
Reconciliation of headline earnings
Net income attributable to
ordinary shareholders 6 235 1 219 411,5
Headline earnings adjustments 5 044 22 144
- impairment of goodwill 1 - 17 100
- amortisation and impairment
of intangibles 5 044 5 044
Headline earnings 11 279 23 363 (51,7)
Number of shares in issue (`000) 69 214 69 431
Number of shares on which
earnings per share is
calculated (`000) 69 214 69 431
Number of shares on
which diluted
earnings per share is
calculated (`000) 2 99 099 99 316
Ratio analysis
Attributable earnings 6 235 1 219
Earnings per share (cents) 9,0 1,8 400,0
Diluted earnings per share (cents) 6,3 1,2
Headline earnings per share (cents) 16,3 33,6 (51,5)
Diluted headline earnings
per share (cents) 2 11,4 23,5
EBITDA 24 270 13 222 83,6
Net asset value per share (cents) 128,2 119,6 7,2
Net tangible asset value
per share (cents) 80,3 64,6 24,3
Dividend per share - final (cents) 6,0 -
Debt: Equity (%) 18,2
Interest cover (times) 4,6 1,0 360,0
Calculation of comparative
headline earnings per share
Headline earnings (as above) 11 279 23 363
Adjusted for 5 331 (20 427)
- provision for liability no
- longer required 1 - (17 100)
- taxation 3 5 331 (3 327)
Comparative headline earnings 16 610 2 936
Comparative headline earnings
per share (cents) 24,0 4,2 471,4
Comparative diluted headline
earnings per share (cents) 2 16,8 3,0
Notes:
1. The provision for liability no longer required and the impairment of goodwill
in the prior year relates to the acquisition of the remaining 80% shareholding
in Khululeka Telecommunications (Pty) Ltd. Full details are given in the 2004
Annual Report.
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. Notional taxation charged against the/(raised as a) deferred tax asset.
Summarised consolidated balance sheet
Reviewed Audited
28 February 29 February
(R`000) 2005 2004
ASSETS
Non-current assets 55 396 68 178
Plant and equipment 10 819 11 174
Intangibles 33 157 38 201
Deferred tax asset 11 235 16 567
Loans 185 2 236
Current assets 74 436 79 040
Inventories 25 571 22 229
Accounts receivable 43 580 54 211
Cash and cash equivalents 5 285 2 600
Total assets 129 832 147 218
EQUITY AND LIABILITIES
Share capital and reserves 88 702 83 025
Non-current liabilities 305 590
Interest bearing liabilities 6 291
Non-interest bearing liabilities 299 299
Current liabilities 40 825 63 603
Interest bearing liabilities 285 17 380
Non-interest bearing liabilities 40 540 46 223
Total equity and liabilities 129 832 147 218
The contingent liability pertaining to the possible claim for a collapsed
structure remains unchanged since reported in the 2004 annual financial
statements. The directors believe that the possibility of an outflow of economic
assets from the judgement against a dormant subsidiary, or a claim for work done
by a sub-contractor in Botswana, are both so remote that these are no longer
considered to be contingent liabilities.
Statement of changes in equity
Reviewed Audited
28 February 29 February
(R`000) 2005 2004
Opening balance 83 025 54 456
Attributable income 6 235 1 219
Currency translation differences (93) (356)
Treasury shares (465) -
Dividends paid - (2 911)
Net shares issued - 30 617
Closing balance 88 702 83 025
Summarised consolidated cash flow statement
28 February 29 February
(R`000) 2005 2004
Cash generated from operations 25 713 24 349
Net financing costs (3 268) (6 133)
Net taxation paid - (191)
Dividends paid - (2 911)
Cash flow from operating activities 22 445 15 114
Cash flow from investing activities (1 657) (26 080)
Cash flow from financing activities (459) (4 786)
Increase/(decrease) in cash resources 20 329 (15 752)
Summarised segmental report
(Operating divisions only)
Telecoms Manuf. Security Other
(R`000) division division division (discont.)
2005
Revenue 138 887 72 010 36 286 82
Operating profit/(loss)+ 16 909 10 329 2 076 (1 442)
2004
Revenue 154 640 62 419 31 351 5 895
Operating profit/(loss)+ 12 178 9 452 983 (3 313)
+ Operating profit/(loss) 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 28 February 2005 reflect the ongoing turnaround
in Jasco`s profitability. All three operating divisions continued to show
progress and earnings increased due to an improvement in operating efficiencies.
Telecommunications benefited from better trading conditions, Jasco`s industry
expertise and empowerment credentials, while Manufacturing`s output grew as a
result of buoyant consumer demand. The Security division doubled its profits,
albeit off a low base, following the refocusing of its business to enable
improved client delivery.
The increase in EBITDA margins to 9,8% (2004: 5,1%) and lower interest charges
resulted in a significant increase in operating profit to R11,9 million (2004:
R0,14 million). Sound working capital management turned these profits into cash.
The result was the elimination of debt and an improvement in the balance sheet
and net asset value.
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 (GAAP) 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 Share Incentive Trust. This change is in line with the latest
listings requirements of the JSE Securities Exchange South Africa. This first
time consolidation of the Share Incentive Trust represents a change in
accounting policy. However, due to the insignificance of the numbers involved,
the comparative numbers have not been restated.
As explained in the 2004 year-end and interim results announcements, as well as
in 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 headline earnings which are comparable with those shown in
the past, the concept of comparative headline earnings was introduced. Headline
earnings for the year under review have accordingly been adjusted by adding back
a notional deferred tax charge to the income statement of R5,3 million that is
credited against the deferred tax asset in the balance sheet.
Results
Jasco ended the year with revenue from continuing operations of R248,8 million
compared to R252,6 million in 2004. Turnover was impacted by the Rand strength,
resulting in a decline in exports. However, operating profit before interest
increased by 141,1% to R15,1 million (2004: R6,3 million), whilst operating
profit amounted to R11,9 million compared to R0,14 million in 2004.
The GAAP treatment of the historical anomalies in Jasco`s results (referred to
above) results in a 51,5% reduction in headline earnings per share to 16,3 cents
per share (2004: 33,6 cents). However, comparative headline earnings per share
increased by 471,4%* to 24,0*cents (2004: 4,2* cents).
Net asset value per share increased by 7,2% to 128,2 cents and net tangible
asset value per share improved by 24,3% to 80,3 cents per share.
Sound working capital management resulted in R22,4 million (or 32,4 cents per
share) of cash being generated from operating activities. Consequently, Jasco
was able to eliminate interest-bearing debt compared to gearing of 18,2% in
2004.
Operational review
All three operating divisions were profitable.
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
products sourced on an exclusive basis from leading overseas suppliers.
This division consists of three operations, namely Webb Industries, which has
been in operation for over 30 years, and the more recently established and
acquired Telesciences and Tasslelane operations.
Revenue for the Telecommunications division reduced by 10,2% to R138,9 million
(2004: R154,6 million). However, operating margin increased to 12,2% (2004:
7,9%) due to improving cost structures, better manufacturing efficiencies and a
more optimal product mix. This division produced 57,7% of group operating profit
from continuing operations.
The decline in revenue is attributable to a decline in exports flowing from the
strengthening of the Rand and an increase in the price of local steel. These
factors particularly affected Webb as 47% of its turnover came from exports.
However, through management`s continued focus on efficiencies and growth in the
local market, Webb produced another solid performance, with strong cash
generation.
Both the Telesciences and Tasslelane operations returned to profitability
following improved operational efficiencies, cost cutting and the awarding of
new contracts.
Jasco`s BEE credentials are now entrenched, which has allowed it to tender for
additional work it could not do before. This, together with its expertise in
wireless telecommunications, has positioned Telecommunications well to tap into
continued opportunities in this growing market.
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 15,4% to R72 million (2004: R62,4 million) due to the
ongoing consumer demand for domestic appliances and automotives. The strong
demand also led to significant cash generation. Operating margins remained
robust, despite the effect of the strong Rand on exports. This division produced
35,2% of group operating profit from continuing operations.
Low interest rates, a solid economy and growth in the new emerging market will
result in the Manufacturing division remaining a good performer for Jasco. The
growth in export volumes to the EU, USA and South America of Jasco`s Just-Chlorr
pool chlorinator and related products continues.
Security
The security 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 financial
institutions, retailers, mines and local government.
The division embarked on a turnaround strategy in the latter part of 2002. The
initial success of this turnaround continued during this period as several
orders were secured and successfully completed. Revenue increased by 16%, with
operating profit doubling to R2,1 million off last year`s relatively low base of
just under R1,0 million.
A dedicated drive to increase order inflow and improve operational efficiencies
through restructuring, as well as an exciting new product range, augurs well for
a continued improvement in profits for this division during the coming year.
Prospects
Jasco`s consolidation phase and restructuring is now complete. Loss-makers have
been turned around, cash flow significantly improved, debt eradicated and the
balance sheet strengthened. In addition, Jasco ranks as a leading BEE company
and was recently placed second in the listed general industrials category of the
Top Empowerment Companies 2005 survey conducted by the Financial Mail and
Empowerdex.
Prospects in all operating divisions remain positive. The Telecommunications
division is especially well placed following the awarding of a material contract
subsequent to year end. The group is set for continued organic growth, with the
financial flexibility to optimise on relevant market opportunities, as they
arise.
The board is optimistic that Jasco will continue to deliver improved results in
the next year and thanks Jasco`s stakeholders for their support during the past
year.
Future changes to the executive team
Over the past five years group CEO, Dr Stuart Robertson has delivered against a
clear mandate from the board to transform Jasco into a BEE entity with a
sustainable growth platform. In 2003 he led the finalisation of Jasco`s BEE
transaction with Community Investment Holdings (CIH). He, together with the
current executive team, also succeeded in achieving a turnaround of Jasco`s
profitability which is evident in the improved results and prospects set out in
this report.
In compliance with Rule 3.59 of the JSE Listings Requirements, the Board
announces that, having completed his mandate, Dr Robertson intends to step down
later this year to pursue further opportunities within the CIH Group. Jasco
remains committed to ongoing transformation and in due course intends to appoint
a suitably qualified CEO. Pending such an appointment and a smooth handover, Dr
Robertson will continue to support the current executive team led by Managing
Director, Joe Madungandaba, and group COO, Martin Lotz. The executive team will
also be strengthened by the appointment of a new group financial director.
The board thanks Dr Robertson for the passion, dedication and results-driven
approach he applied in the fulfilment of his duties.
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. No material events have occurred between the end of the financial year
and the date of the review report.
Dividend
In view of the ongoing improvement in Jasco`s results and the generation of
cash, the directors have resolved to pay an annual dividend. The final dividend
(No. 14) of 6,0 cents per share will be paid, in terms of STRATE, as follows:
Last day to trade (cum dividend) Friday, 20 May 2005
Shares to commence trading (ex dividend) Monday, 23 May 2005
Record date Friday, 27 May 2005
Payment date Monday, 30 May 2005
Shares may not be de-materialised or re-materialised between Monday, 23 May 2005
and Friday, 27 May 2005, both dates inclusive.
For and on behalf of the board
Dr ATM Mokgokong Dr SH Robertson MH Lotz
(Non-Executive Chairperson) (Chief Executive Officer) (Chief Operating
Officer)
19 April 2005
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)#, MJ Madungandaba (MD)#, MH Lotz (COO)#
#(Executive directors) +(Zimbabwean)
Registered office: Woodmead Park, 8 Saddle Drive, Woodmead, 2157
Transfer secretaries: Ultra Registrars (Pty) Limited, 11 Diagonal Street,
Johannesburg, 2001
(* Excludes the effects derived from recognising a deferred tax asset)
