| Mon 31 Oct 2005, 7:30 | | Jasco - Unaudited interim results for the six mont |
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Jasco - Unaudited interim results for the six months ended 31 August 2005
Jasco Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1987/003293/06
Share code: JSC
ISIN: ZAE000003794
www.jasco.co.za
Unaudited interim results for the six months ended 31 August 2005
Revenue increased by 23%
Operating profit increased by 36%
Earnings per share increased by 32%
Headline earnings per share increased by 43% to 10,6 cents
Introduction
The continued improvement in Jasco"s results was confirmed by a 43% increase in
headline earnings for the six months ended 31 August 2005. All divisions were
profitable and improved on the previous period"s performance. These results are
in line with the trading update issued on 18 October 2005 and incorporate the
effect of the conversion to International Financial Reporting Standards
("IFRS"). The adoption of IFRS, other than for the treatment of goodwill, did
not have a material impact on the broader Jasco operating results. Full
disclosure of the effects of the changes is given under the section headed
Adoption of International Financial Reporting Standards.
The interim results for the six months ended 31 August 2005 have not been
audited.
Results
Revenue increased by 23% for the period under review to R150 million (2004: R122
million). Together with the improved efficiencies derived from this growth in
turnover and the substantial decrease in interest paid, operating profit grew by
36% to R10,1 million (2004: R7,4 million).
The combined result of higher revenue, reduced interest paid and the improved
operating profit yielded an increase of 43% in headline earnings per share after
tax to 10,6 cents (2004: 7,4 cents) and a 32% increase in earnings per share to
9,8 cents (2004: 7,4 cents).
Net asset value per share increased by 4 cents per share to 138,2 cents from 28
February 2005, after the final dividend for the 2005 financial year of 6 cents
per share was paid during this period.
The group continued to generate cash from operations, although the R4 million of
cash generated during the period was slightly lower than the R6 million during
the corresponding period. This was due to the 23% growth in revenue during the
first half of the year, which will result in stronger cash inflows in the second
half of the year. The payment of a dividend, an investment to improve our
annuity income base and capital expenditure to increase and maintain capacity,
resulted in R5,7 million of cash being utilised in the group. Gearing at 31
August 2005 was below 3% (2004: 14%) and well within our target. The generation
of cash from profits during the second half of the year will eliminate gearing
at year end.
Operational review
All three operating divisions continued to grow revenue and improve operating
profits. The Telecommunications division experienced an increase in spending
from its major customers, while Manufacturing"s output continued to grow as a
result of an increased product offering and consumer demand for domestic
appliances. The Security division continued its recovery and increased revenue
by more than 60% compared to the same period last year.
Telecommunications
The Telecommunications division focuses on the provision of solutions, products
and services to telecommunications network operations. 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.
The division consists of three operations, Webb Industries, Telesciences and
Tasslelane.
The three business units in this division produced 61,4% of group operating
profit from all operating divisions. All three business units traded profitably
and the continued efforts to increase our product offering into a growing
industry throughout Africa are expected to support the future growth in these
business units.
Revenue increased by 16% to R84,3 million from the R72,8 million for the prior
period, whilst operating profit increased by 20% to R10,8 million. Operating
margins also continued the upward trend, with an increase to 12,8% from 12,3%
the previous period.
The increase in revenue and operating profit was achieved through strong
performances in Telesciences and Tasslelane. Both of these business units
benefited from the increased spending experienced in the telecommunications
sector which was accompanied by an increase in product lines to supplement our
current offering.
Revenue from the Mast and Towers business, a small part of Webb Industries, was
negatively influenced by the strong Rand and the impact of rising local steel
prices. To counter this loss in revenue, we are currently investigating a
strategic partnership that will secure manufacturing capacity, increase volumes
and reduce overheads.
To ensure a continued balance in our portfolio, we believe that exports should
remain a focus area. In line with this strategy, Webb Industries has been able
to profitably expand their range of products for export into Africa, Europe and
the USA, despite the strong performance of the Rand.
Manufacturing
This division trades as Special Cables and operates from an established factory
in KwaZulu-Natal. It manufactures and assembles wire harnesses and plastic
moulded components for large domestic appliances, niche automotive control
units/sub assemblies and manufactures a pool chlorinator under the Just-Chlor
brand.
Manufacturing produced 28,7% of group operating profit from all operating
divisions. Revenue increased by 19% to R40,3 million (2004: R33,8 million) in
the period under review. The continued growth resulted from the healthy economic
environment and the electrification of previously neglected areas. Operating
margins remained stable at 12,5%, and are expected to increase as the major
production output is traditionally skewed towards an increased demand in
December.
Demand for electronic components from manufacturers of domestic appliances and
automotive products in the local market remain at high levels.
Security
This division offers electronic security solutions as an integrator of stand-
alone and integrated closed circuit television networks (CCTV), access control,
pneumatic tube and alarm monitoring systems.
The restructuring of this division into three focused separate business units,
Multivid, Scaffel and Aerocom during this period has proved successful and the
division was able to increase both revenue and operating profit substantially
from the corresponding period during 2004.
Revenue increased to R24 million, 65% up from the previous period. The loss of
R122 000 incurred in the previous period was converted into an operating profit
of R1,7 million for the period under review. Operating margins improved by 26%
to 7,2% over the operating margins achieved for the full year ended 28 February
2005.
In line with our business model of a diversified portfolio that will derive 25%
of revenue from the Security division, this division"s contribution increased to
16,2% (2004: 12%).
During the period under review, this division purchased a long-term Full Service
Provider contract for R2,7 million. This contract extends the division"s
geographical reach into the Free State, Western, Eastern and Northern Cape
regions and will almost double its annuity-based service revenue. Efficiencies
will also be improved from the increased workflow in those regions through the
more optimal utilisation of personnel, infrastructure and service capacity. New
branches were opened in Bloemfontein and Port Elizabeth to service the Free
State and the Eastern Cape regions and a formal presence in these regions will
allow us access to a broader customer base.
The growing demand for quality electronic security solutions, our experienced
team and a sound business model will ensure the continued recovery of this
division to its rightful place in Jasco"s portfolio of businesses.
Prospects
The interim results underpin the success of the turnaround achieved during the
prior years. Prospects in all core operating divisions remain positive. As
outlined at year end, Jasco is set for continued organic growth, with the
financial flexibility to capitalise on relevant market opportunities, as they
arise. Jasco"s second half is traditionally better than the first and in the
absence of any unforeseen circumstances, management expects to end the year with
a further improvement in results.
Adoption of International Financial Reporting Standards
In line with the listing requirements of the JSE Limited, Jasco adopted
International Financial Reporting Standards (IFRS) with effect from 1 March
2005. As the group publishes comparative information for one year in its
financial statements, the date for transition to IFRS is effectively 1 March
2004, which represents the start of the earliest period of comparative
information presented.
Basis of presentation
The abridged financial statements have been prepared in terms of IFRS expected
to be applicable at 28 February 2006 and in compliance with IAS 34 - Interim
Financial Reporting. This may differ from IFRS finally in effect at 28 February
2006 as a result of ongoing review and possible amendment by interpretive
guidance from the International Accounting Standards Board (IASB) and the
International Financial Reporting Interpretations Committee (IFRIC) and may
therefore be subject to change. The financial statements for the 6 months ended
31 August 2004 and the annual financial statements for the year ended 28
February 2005 were previously prepared in accordance with South African
Statements of Generally Accepted Accounting Practice (SA GAAP).
In preparing these abridged financial statements for the six months ended 31
August 2005, certain accounting policy changes, reclassifications and share-
based payment valuations were applied to comply with IFRS. The comparative
figures for the six months ended 31 August 2004 and the year ended 28 February
2005 were restated to reflect these adjustments.
Reconciliations and descriptions of the effect of the transition from SA GAAP to
IFRS on the group"s equity and net profit are provided below.
Transitional arrangements
The group"s annual financial statements for the year ending 28 February 2006
will be the first set of annual financial statements that comply with IFRS. The
group has applied IFRS 1 (First time adoption of International Financial
Reporting Standards) in preparing these abridged financial statements.
The group"s transition date is 1 March 2004. The group"s opening balance sheet
at that date has been restated to reflect all existing IFRS statements expected
to be applicable 28 February 2006. At the transition date, IFRS 1 allows a
number of exemptions to this retrospective application principle on adoption of
IFRS.
The group has applied the following optional exemptions from full retrospective
application:
Elections applicable 1 March 2004
Share based payments transactions exemption
The group has elected to apply the share based payments exemption, IFRS 2 (Share
based payments) which requires that equity instruments granted under equity-
settled rewards, are measured at the fair value of the equity instruments
granted. By applying the exemption, shares that were granted before 7 November
2002 or granted after 7 November 2002, but vested before 1 January 2005 are not
subject to the principle of fair value measurement in terms of IFRS 2.
Business combinations
The group has elected not to retrospectively apply the requirements of IFRS 3
(Business combinations) to transactions that occurred prior to March 2004. As a
result, the carrying amount of goodwill is the amortised amount on 28 February
2004. Previously amortised goodwill, and goodwill eliminated against reserves
have not been re-instated.
The following new accounting policies were applied for IFRS reporting:
Intangibles
Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets of a subsidiary at the date of acquisition. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment
losses. Goodwill is allocated to cash generating units for the purpose of
impairment testing.
Share based payments
Shares granted to employees are subject to service and performance vesting
conditions, and the fair value is recognised as an employee benefit expense with
a corresponding increase to the share based payments reserve in equity over the
vesting period.
The expense is adjusted at the end of each reporting period to reflect actual
and expected levels of vesting.
Adjustments implemented with effect from 1 March 2004
IAS 36/IFRS 3 - Goodwill
Previously, the group recognised acquired goodwill at cost less accumulated
amortisation and any impairment in value. Goodwill was amortised on a straight-
line basis over a period of ten years.
In terms of IFRS 3, goodwill is not amortised but subject to impairment reviews,
both annually and when there are indications that the carrying value may not be
recoverable.
The goodwill amortisation recognised in the income statement during the 2005
financial year has been reversed, resulting in a corresponding increase in
equity. All goodwill has accordingly been tested for impairment at 1 March 2004,
31 August 2004 and 28 February 2005. Due to the adoption of the new accounting
policy to allocate goodwill to cash generating units, goodwill relating to
certain cash generating units was impaired as at 1 March 2004.
IFRS 2 - Share based payments
The group grants shares to employees under the Jasco Employee Share Incentive
Trust (the Trust).
Other than costs incurred in administering the Trust, which were expensed as
incurred, these payments did not result in any expense in the income statement.
In accordance with the requirements of IFRS 2, the group now recognises an
expense in the income statement, with a corresponding credit to equity,
representing the fair value of employee shares granted, recognised on a
straight-line basis over the vesting period of the shares.
IAS 16 - Revaluation of residual values in plant and equipment
In calculating the depreciation charge, an entity reduces the total depreciable
amount of an asset by that asset"s residual value. Previously, under SA GAAP,
the estimated residual value was fixed on recognition of the asset and was not
subject to reassessment. IAS 16 requires that the residual value of the asset
should be reassessed at each balance sheet date, with a resultant effect on the
depreciation charge already recognised. Annual increases in asset values result
in an annual upward adjustment of residual values.
IAS 17 - Leases
IAS 17 requires both operating lease income and operating lease expenses to be
accounted for on a straight line basis over the lease term.
In accordance with the recently issued Circular 7/2005 from the South African
Institute of Chartered Accountants, leases with fixed escalations have been
reassessed and subsequently accounted for on a straight line basis over the
period of the lease. This resulted in a higher operating lease expense being
reported for previous periods, with a resultant reduction in the 2005 equity
position.
While there has been no change to the finance lease indicators included in the
statement the key principle of who bears the risks and rewards of ownership was
considered in order to ensure correct classification of substance over form. As
a result certain leases previously accounted for as operating leases have been
reclassified as finance leases. The effect of this reclassification was not
material.
Reconciliation between IFRS and SA GAAP
IFRS IFRS IFRS
restated restated
year 6 months transition
ended ended date
28 February 31 August 1 March
(R"000) 2005 2004 2004
IFRS equity impact
Equity as previously reported 88 702 85 689 83 025
- SA GAAP
4 168 1 602 (922)
Change in accounting policy - (929) (739) (804)
improvement project
IAS 17 Restatement of (929) (739) (804)
operating lease expenses
IFRS adoption 5 097 2 341 (118)
IFRS 2 Share based payment 38 - -
reserve
IFRS 2 Share based payment (38) - -
IAS 16 Restatement of 4 994 4 740 4 803
accumulated depreciation to
reflect plant and equipment"s
useful lives
IFRS 3 Goodwill 1 323 (1 198) (3 721)
impairment/amortisation
Deferred tax adjustments on (1 220) (1 201) (1 200)
the above restatements
Equity restated - IFRS 92 870 87 291 82 103
IFRS income statement impact
Net income as previously 6 235 2 620
reported - SA GAAP
5 052 2 524
Change in accounting policy - (125) 65
improvement project
IAS 17 Restatement of (125) 65
operating lease expenses
IFRS adoption 5 177 2 459
IFRS 2 Share based payment (38) -
reserve
IAS 16 Restatement of 191 (63)
accumulated depreciation to
reflect plant and equipment"s
useful lives
IFRS 3 Goodwill 5 044 2 523
impairment/amortisation
Deferred tax adjustments on the (20) (1)
above restatements
Net income restated - IFRS 11 287 5 144
Directors and Secretary
During the period under review, TB Rutstein and SH Robertson resigned from the
Board of Directors. MH Lotz resigned as Company Secretary and E Mashilwane was
appointed in his place.
For and behalf of the Board
Dr ATM Mokgokong MJ Madungandaba MH Lotz
(Non-executive (Chief Executive (Chief Operating
Chairperson) Officer) Officer)
31 October 2005
Directors: Dr ATM Mokgokong (Chairperson), PS Chapwanya+, FE Emary, JC Farrant,
Dr JM Matsipa,
JA Sherry (Non-Executives), MJ Madungandaba (CEO), MH Lotz (COO) (Executives)
+ (Zimbabwean)
Registered office: Woodmead Park, 8 Saddle Drive, Woodmead 2157
Transfer secretaries: Ultra Registrars (Pty) Ltd, 11 Diagonal Street,
Johannesburg 2001
Further details can be found on our website www.jasco.co.za
Summarised consolidated income statements
Unaudited 6 IFRS IFRS
months ended restated 6 restated
31 August months year ended
2005 ended 31 28 February
August 2004 2005
(R"000) Note
Revenue 149 720 122 014 248 832
- from continuing 149 720 121 946 248 750
operations
- from - 68 82
discontinuing
operations
Operating profit 10 326 9 338 20 307
before interest
Net interest paid (235) (1 945) (3 371)
Operating profit 10 091 7 393 16 936
- from continuing 10 091 7 600 18 485
operations
- from - (207) (1 549)
discontinuing
operations
Net profit before 10 091 7 393 16 936
taxation
Taxation (3 289) (2 218) (5 649)
Net profit after 6 802 5 175 11 287
taxation
Loss from - (31) -
associated company
Profit for the 6 802 5 144 11 287
period/year
Reconciliation of
headline earnings
Net earnings 6 802 5 144 11 287
attributable to
ordinary
shareholders
Headline earnings 517 - -
adjustments
- impairment of 87 - -
goodwill
- reversal of 430 - -
currency
translation
reserve
Headline earnings 7 319 5 144 11 287
Number of shares ("000) 69 214 69 431 69 214
in issue
Number of shares ("000) 69 214 69 431 69 214
on which earnings
per share is
calculated
Number of shares ("000) 1 99 099 99 316 99 099
on which diluted
earnings per share
is calculated
Ratio analysis
Attributable 6 802 5 144 11 287
earnings
Earnings per share (cents) 9,8 7,4 16,3
Diluted earnings (cents) 6,9 5,2 11,4
per share
Headline earnings (cents) 10,6 7,4 16,3
per share
Diluted headline (cents) 7,4 5,2 11,4
earnings per share
EBITDA 13 030 11 275 24 504
Net asset value (cents) 138,2 125,7 134,2
per share
Net tangible asset (cents) 84,7 76,1 84,4
value per share
Dividend per share (cents) 6,0
- final
Debt: Equity (%) 2,8 14,2 -
Interest cover (times) 43,9 4,8 6,0
Note:
1. 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 sheets
Unaudited IFRS restated IFRS
restated
6 months 6 months year ended
ended ended
31 August 31 August 28 February
(R"000) 2005 2004 2005
ASSETS
Non-current assets 63 751 64 447 62 386
Plant and equipment 17 241 15 901 17 605
Intangibles 37 093 34 481 34 480
Deferred lease income 112 82 101
Deferred tax asset 9 301 13 149 10 015
Loans 4 834 185
Current assets 101 833 85 953 74 436
Inventories 33 635 26 255 25 571
Trade and other 68 198 57 098 43 580
receivables
Cash and cash - 2 600 5 285
equivalents
Total assets 165 584 150 400 136 822
EQUITY AND LIABILITIES
Share capital and 95 685 87 291 92 870
reserves
Non-current liabilities 3 414 1 736 3 127
Interest bearing 2 310 789 1 934
liabilities
Non-interest bearing 1 104 947 1 193
liabilities
Current liabilities 66 485 61 373 40 825
Interest bearing - 14 175 285
liabilities
Non-interest bearing 66 073 47 198 40 540
liabilities
Bank overdraft 412 - -
Total equity and 165 584 150 400 136 822
liabilities
The contingent liabilities as reported on in the 2005 annual financial
statements remain unchanged.
Summarised consolidated cash flow statements
Unaudited IFRS restated IFRS
restated
6 months 6 months year ended
ended ended
31 August 31 August 28 February
(R"000) 2005 2004 2005
Cash generated from 4 082 6 015 26 159
operations
Net financing costs (235) (1 945) (3 371)
Net taxation paid (693) - -
Dividends paid (4 156) - -
Cash flow from operating (1 002) 4 070 22 788
activities
Cash flow from investing (4 943) (705) (1 658)
activities
Cash flow from financing 248 (160) (801)
activities
(Decrease)/increase in (5 697) 3 205 20 329
cash resources
Statements of changes in equity
Unaudited IFRS IFRS
restated restated
6 months 6 months year ended
ended ended
31 August 31 August 28 February
(R"000) 2005 2004 2005
Opening balance 92 870 82 103 82 103
Share premium (300) - -
Treasury shares - Share 28 - (465)
Incentive Trust
Currency translation - 44 (93)
differences
Reversal of currency 430 - -
translation reserve
Profit for the 6 802 5 144 11 287
period/year
Dividends paid (4 166) - -
Share based payment 21 - 38
reserve
Closing balance 95 685 87 291 92 870
Summarised segmental reports
for the six months ended 31 August 2005, 31 August 2004 and the year ended 28
February 2005 (Operating divisions only)
Telecoms Manufacturing Security
(R"000) division division division Discontinued
31 August 2005
(Unaudited)
Revenue 84 308 40 268 24 006 -
Operating 10 770 5 041 1 740 -
profit*
31 August 2004
(IFRS restated)
Revenue 72 767 33 785 14 512 68
Operating 8 951 4 249 (122) (207)
profit*
28 February
2005 (IFRS
restated)
Revenue 138 887 72 010 36 286 82
Operating 16 646 10 668 2 051 (1 442)
profit*
* Operating profit excludes interest paid or received and is stated before
making adjustments for inter-group interest and administration fees.
Date: 31/10/2005 07:30:34 AM Produced by the JSE SENS Department
