| Thu 20 Apr 2006, 7:46 | | Jasco Electronics Holding Limited - Reviewed resul |
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Jasco Electronics Holding Limited - Reviewed results for the year ended 28
February 2006 and further cautionary announcement
Jasco Electronics Holding 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 2006 and further cautionary
announcement
Revenue up 31%
Net profit before tax up 61%
Earnings per share up 61%
Headline earnings up 70%
50% increase in final dividend payment to 9 cents
Introduction
The Board of directors have pleasure in presenting the reviewed results for the
year ended 28 February 2006. The increase in headline earnings of 70% to 27,7
cents per share and increase in earnings of 61% to 26,2 cents per share cements
Jasco"s return to earnings growth.
These results are in line with the trading update issued on 10 March 2006 and
incorporate the effect of the conversion to International Financial Reporting
Standards ("IFRS") from 1 March 2004. The adoption of IFRS has not had a
material impact on Jasco"s headline earnings. The effect on earnings and the
balance sheet are fully disclosed under the section headed Adoption of
International Financial Reporting Standards.
Results
In line with Jasco"s stated strategy of continuously increasing organic growth,
it is pleasing to report a 31% increase in revenue to R334,4 million (2005:
R254,8 million). 2,5% of this growth came from an improvement in selling prices,
whilst 28,5% came from an increase in volumes. Increased efficiencies resulted
in an improvement in operating margin before interest paid from 8,8% to 9,1%
this year, whilst net profit before taxation grew by 61,2% to R27,3 million
(2005: R16,9 million).
After providing for taxation, together with the impact of lower interest paid,
headline earnings per share increased by 70% to 27,7 cents per share (2005: 16,3
cents per share).
The higher levels of profitability improved the net tangible asset value per
share by 16,4 cents per share on the prior year to 100,8 cents. This represents
an increase of 19,4%.
The group continued to generate cash from operations. Despite funding the sharp
increase in organic growth, cash generated from operations as a percentage of
operating profit before net financing costs was 83,2%, which is in line with our
internal target of 85%. Working capital reflects an increase in inventories to
optimal levels as a result of the higher revenue.
The R23,4 million cash generated from the operations was utilised to pay
dividends of R4,2 million, taxation of R1,1 million, a R2,7 million investment
to improve annuity based income in the Security division and an investment in
infrastructure of R4,3 million. The majority of the infrastructure spend was
incurred in additions and refurbishing by Webb Industries and Special Cables to
improve the efficiencies and increase the capacity of their manufacturing
assets. After the repayment of non-current debt of R0,9 million, cash resources
increased by R9,4 million to R14,7 million, compared to cash on hand of R5,3
million at the end of the corresponding year.
Operational review
All three divisions continued to grow and improve operating profits.
Telecommunications
The Telecommunications division continues to focus on the provision of
solutions, products and services to telecommunications network operations
through a combination of in-house products and strategic products sourced on an
exclusive basis from leading overseas suppliers.
The division consists of three operations: Webb Industries, Telesciences and
Tasslelane.
The telecommunications division remains the biggest contributor to both group
revenue and profits and showed a pleasing improvement in profitability. Revenue
increased by 32,5% to R192,0 million. The contribution to group revenue remained
stable at 57%, whilst the contribution to operating profit from operating
divisions increased from 54,8% to 60,3% or R23,4 million. Operating margins
increased from 10,7% to 12,2%.
The increase in revenue and operating profit was achieved through continued
strong performances from Webb Industries and improved performances from our
acquisitions of three years ago, namely Telesciences and Tasslelane. Through
these acquisitions, Jasco positioned itself as a black controlled entity, able
to benefit from the increased spending in the telecommunications sector
experienced during this year. This was supported by our increase in product
lines to supplement the current offering.
As reported at our interim results presentation, the revenue from the
traditional Mast and Towers business that historically contributed approximately
20% of the Webb Industries business unit, continued to suffer from the impact of
the strong Rand and rising local steel prices. To ensure that we can continue to
profitably offer the Mast and Towers product range to our customer base, we have
concluded a strategic partnership with LeBLANC Communications to merge our Mast
and Towers business with their telecommunication tower operation. The cost
saving benefits from the sourcing of steel by the combined operation will
improve margins and the merged business will also be able to offer our clients
an expanded range of products.
Manufacturing
Special Cables operates from a factory in Kwazulu-Natal where it manufactures
and assembles wire harnesses and plastic moulded components for large domestic
appliances. The division also manufactures niche automotive control units/sub
assemblies.
Manufacturing"s revenue increased by 19,3% to R85,9 million (2005: R72,0
million) for the year under review. The continued growth resulted from the
healthy economic environment, the increase in product lines and the
electrification of previously neglected areas.
Operating profit increased by 8,4% to R11,6 million (2005: R10,7 million), which
represented 29,9% of group operating profit from operating divisions. Operating
margins decreased to a still healthy 13,5% (2005: 14,8%) due to lower price
increases and higher than inflation rate increases in international commodity
prices. However, we are pleased to report that the margin achieved exceeded our
internal targets.
We are in the final stages of acquiring a small manufacturing business that will
increase our capacity and product range. This business will be incorporated into
Special Cables and will be instrumental in expanding our market and client base
in the future.
Security
This division operates as three stand-alone business units, namely Multivid,
Scaffel and Aerocom. These units offer electronic security solutions as
integrators of stand-alone and integrated closed circuit television networks
(CCTV), access control, pneumatic tube and alarm monitoring systems.
Security continued its recovery, with an 81,0% increase in profits to R3,8
million (2005: R2,1 million). Contribution to group operating profits increased
from 7,5% in the corresponding period to 9,8%. Contribution to revenue increased
to 16.4% (2005: 14,3%), indicating progress towards our business objective of a
25% contribution from Security to total revenue.
Revenue increased to R54,6 million, 50,6% up from the corresponding year. The
improvement in efficiencies from the increase in the revenue and synergies
derived from the purchase of a long-term Full Service Provider contract resulted
in an increase in operating margin to 7,0%. We purchased the contract for R2,7
million during the year under review to expand the division"s geographical reach
into the Free State, Western, Eastern and Northern Cape regions and to almost
double our annuity-based service revenue. Efficiencies have already improved
from the increased workflow in those regions, through the 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 allows us access to a broader
customer base.
Prospects
It has been our stated intention to grow Jasco both organically and through
strategic acquisitions. The success of the organic growth strategy is evidenced
by the 31% growth in revenue and 61% growth in net profit before taxation.
Prospects in all our operating divisions remain positive in an economic
environment that is both sound and buoyant. Expenditure in the
telecommunications sector is expected to remain strong, in line with the
liberalisation taking place in this sector, whilst demand for electronic
components from manufacturers of domestic appliances and automotive products in
the local market remain at high levels. Improved operational efficiencies, as
well as opportunities for further organic growth, support the continued recovery
of the Security division. Finally, Government"s recently announced commitment to
infrastructure development creates strong opportunities for the group.
Jasco is therefore set to continue organic growth. The group has no gearing,
which places it in a position to capitalise on relevant market opportunities as
they arise. In the absence of any unforeseen circumstances, management expects
further earnings growth in Jasco.
Strategic acquisition opportunities have been investigated during the year, but
although a few minor acquisitions were made during the year and post year-end,
no significant acquisitions have been concluded. The group is currently under a
cautionary as it is investigating certain meaningful acquisition opportunities.
The group remains committed to implementing a responsible acquisition strategy
that will lead to long-term growth in shareholder value.
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.
Dividends
In view of the ongoing improvement in Jasco"s results and the generation of
cash, the directors have resolved to increase this year"s annual dividend. The
final dividend (No. 15) of 9,0 cents per share represents an increase of 50%
from the dividend paid last year. The dividend will, in terms of STRATE, be paid
as follows;
Event Date
Last day to trade (cum dividend) Friday, 12 May 2006
Shares to commence trading (ex dividend) Monday, 15 May 2006
Record date Friday, 19 May 2006
Payment date Monday, 22 May 2006
Shares may not be de-materialised or re-materialised between Monday, 15 May 2006
and Friday, 19 May 2006, both dates inclusive.
Further cautionary announcement
Jasco issued a cautionary announcement on 10 March 2006. Jasco shareholders are
advised that discussions are still taking place which, if successfully
concluded, may have an effect on the price of the company"s shares.
Accordingly, Jasco shareholders are advised to continue exercising caution when
dealing in their Jasco shares until a further announcement is made.
Presentation of results
In view of the cautionary, a detailed presentation of our results and growth
strategy will only be hosted in about June this year.
Directors and Secretary
During the year under review, TB Rutstein and SH Robertson resigned from the
Board of directors. MH Lotz resigned as Company Secretary to take up the
position of Chief Operating Officer and TE Mashilwane was appointed in his
place.
For and on behalf of the Board
Dr ATM Mokgokong MJ Madungandaba MH Lotz
(Non-Executive (Chief Executive (Chief Operating
Chairperson) Officer) Officer)
20 April 2006
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
Reviewed Restated
28 February 28 February Change
(R"000) Note 2006 2005 %
Revenue 334 402 254 782 31
Turnover 332 169 252 574
Interest 2 233 2 208
received
Operating profit 30 339 22 516 35
before interest
paid and
taxation
Interest paid (3 025) (5 580)
Net profit 27 314 16 936 61
before taxation
Taxation (9 177) (5 648)
Profit for the 18 137 11 288 61
year
Reconciliation
of headline
earnings
Net earnings 18 137 11 288
attributable to
ordinary
shareholders
Headline 1 046 -
earnings
adjustments
- impairment of 610 -
goodwill
- reversal of 436 -
currency
translation
reserve
Headline 19 183 11 288 70
earnings
Number of shares ("000) 69 431 69 431
in issue
Treasury shares ("000) 119 217
Number of shares
on which
earnings
per share is ("000) 69 312 69 214
calculated
Number of shares
on which diluted
earnings per ("000) 99 197 99 099
share is
calculated
Ratio analysis
Attributable 18 137 11 288
earnings
Earnings per (cents) 26,2 16,3
share
Diluted earnings (cents) 18,3 11,4
per share
Headline (cents) 27,7 16,3
earnings per
share
Diluted headline (cents) 19,3 11,4
earnings per
share
EBITDA 33 442 24 504
Net asset value (cents) 154,3 134,2
per share
Net tangible (cents) 100,8 84,4
asset value per
share
Dividend per (cents) 9,0 6,0
share - final
Debt:Equity (%) - -
Interest cover (times) 31,7 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
Reviewed Restated
28 February 28 February
(R"000) 2006 2005
ASSETS
Non-current assets 62 911 62 286
Plant and equipment 17 441 17 605
Intangibles 37 071 34 480
Deferred tax asset 8 395 10 016
Loans 4 185
Current assets 111 252 74 537
Inventories 41 202 25 571
Trade and other receivables 55 370 43 681
Cash and cash equivalents 14 680 5 285
Total assets 174 163 136 823
EQUITY AND LIABILITIES
Share capital and reserves 106 944 92 871
Non-current liabilities 1 497 1 976
Interest bearing liabilities 1 198 1 677
Non-interest bearing liabilities 299 299
Current liabilities 65 722 41 976
Interest bearing liabilities 341 542
Non-interest bearing liabilities 65 381 41 434
Total equity and liabilities 174 163 136 823
Statements of changes in equity
Reviewed Restated
28 February 28 February
(R"000) 2006 2005
Opening balance 92 871 82 104
Share premium (300) -
Treasury shares - Share incentive (84) (465)
Trust
Loss on translation of foreign (6) (93)
subsidiary
Reversal of currency translation 436 -
reserve
Share based payment reserve 56 37
Profit for the year 18 137 11 288
Dividends paid (4 166)
Closing balance 106 944 92 871
Summarised consolidated cash flow statements
Reviewed Restated
28 February 28 February
(R"000) 2006 2005
Cash generated from operations 23 371 26 417
Net financing costs (792) (3 372)
Net taxation paid (1 144) -
Dividends paid (4 166)
Cash flow from operating activities 17 269 23 045
Cash flow from investing activities (7 012) (3 130)
Cash flow from financing activities (862) 414
Increase in cash resources 9 395 20 329
Summarised segmental reports
Sub total
Telecoms Manuf. Security operating
(R"000) division division division divisions Other Total
28
February
2006
(Reviewed)
Revenue 191 956 85 925 54 629 332 510 1 892 334 402
Operating 23 436 11 632 3 801 38 869 (8 530) 30 339
profit *
28
February
2005
(Restated)
Revenue 144 919 72 010 36 286 253 215 1 567 254 782
Operating 15 469 10 668 2 105 28 242 (5 726) 22 516
profit *
* Operating profit of the operating divisions excludes interest paid or received
and is stated before making adjustments for inter-group interest and
administration fees.
Adoption of International Financial Reporting Standards
IFRS impact
Introduction
In line with the listing requirements of the JSE Limited, Jasco is adopting
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.
The adoption of IFRS had no material effect on the headline earnings. However,
because IFRS no longer permits the amortisation of goodwill, earnings were
materially affected by R5,0 million.
Basis of presentation
The abridged financial statements have been prepared in terms of IFRS applicable
at 28 February 2006.
Reconciliations and descriptions of the effect of the transition from SA GAAP to
IFRS on the group"s equity, financial position and net profit are provided.
Transitional arrangements
The group"s annual financial statements for the year ended 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
applicable at 28 February 2006.
At the transition date, IFRS 1 allows a number of exemptions to this
retrospective application principle on adoption of IFRS.
Reconciliation of balance sheet at 28 February 2005
Adjustments
Previously in respect of
(R"000) Note stated IAS 17
ASSETS
Non-current assets 55 396 2 071
Plant and equipment 1;2 10 819 1 792
Intangibles 3 33 157 -
Deferred tax asset 5 11 235 279
Loans 185 -
Current assets 74 436 101
Inventories 25 571 -
Trade and other receivables 4 43 580 101
Cash and cash equivalents 5 285 -
Total assets 129 832 2 172
EQUITY AND LIABILITIES
Share capital and reserves 88 702 (650)
Non-current liabilities 305 1 671
Interest bearing liabilities 2 6 1 671
Non-interest bearing 299 -
liabilities
Current liabilities 40 825 1 151
Interest bearing liabilities 2 285 257
Non-interest bearing 4 40 540 894
liabilities
Total equity and liabilities 129 832 2 172
Reconciliation of balance sheet at 28 February 2005
Effect of
Previous transition Restated
(R"000) Note GAAP to IFRS IFRS
ASSETS
Non-current assets 57 467 4 819 62 286
Plant and equipment 1;2 12 611 4 994 17 605
Intangibles 3 33 157 1 323 34 480
Deferred tax asset 5 11 514 (1 498) 10 016
Loans 185 - 185
Current assets 74 537 - 74 537
Inventories 25 571 - 25 571
Trade and other 4 43 681 - 43 681
receivables
Cash and cash 5 285 - 5 285
equivalents
Total assets 132 004 4 819 136 823
EQUITY AND LIABILITIES
Share capital and 88 052 4 819 92 871
reserves
Non-current 1 976 - 1 976
liabilities
Interest bearing 2 1 677 - 1 677
liabilities
Non-interest bearing 299 - 299
liabilities
Current liabilities 41 976 - 41 976
Interest bearing 2 542 - 542
liabilities
Non-interest bearing 4 41 434 - 41 434
liabilities
Total equity and 132 004 4 819 136 823
liabilities
Notes to the reconciliation of the balance sheet at 28 February 2005
1. IAS 16 - Revaluation of residual values in plant and equipment
2. IAS 17 - Restatement of operating leases as finance leases
3. IAS 36/IFRS 3 - Reversal of amortisation and accounting for impairment of
goodwill
4. IAS 17 - Straight-lining of operating leases
5. Deferred tax adjustments on the above restatements.
Reconciliation of equity for the year ended 28 February 2005
IFRS IFRS
restated
year ended transi-
tion
date
28 February 1 March
(R"000) 2005 2004
Equity as 88 702 83 025
previously
reported - SA GAAP
4 169 (921)
Effect of - (930) (804)
IAS 17 Restatement of (930) (804)
operating lease
expenses
IFRS adoption 5 099 (117)
IFRS 2 Share based payment 37 -
reserve
IFRS 2 Share based payment (37) -
IAS 16 Restatement of 4 994 4 803
accumulated
depreciation
to reflect plant and
equipment"s useful
lives
IFRS 3 Goodwill 1 323 (3 721)
impairment/amortisation
Deferred tax (1 218) (1 199)
adjustments on the
above restatements
Equity restated - 92 871 82 104
IFRS
Reconciliation of profit for the year ended 28 February 2005
Adjustments Effect of
Previously in respect Previous transition Restated
of
(R"000) Note stated IAS 17 GAAP to IFRS IFRS
Operating 1;2 15 132 (22) 15 110 5 198 20 308
profit
before
interest
Net 1 3 268 104 3 372 - 3 372
interest
paid
Operating 11 864 (126) 11 738 5 198 16 936
profit
Taxation 3 5 629 (38) 5 591 57 5 648
Net 6 235 (88) 6 147 5 141 11 288
profit
after
taxation
Notes to the reconciliation of profit for the year ended 28 February 2005
R"000
1. IAS 17 - Restatement of operating leases
Depreciation of leased assets (294)
Rental paid - offices (203)
Rental paid - office equipment 447
Rental received - hi sites 28
(22)
Interest paid 104
(126)
2. IFRS adoption
Share based payment (IFRS 2) (37)
Revaluation of residual values in plant (IAS 16) 191
and equipment
Reversal of goodwill amortisation (IFRS 3) 5 044
5 198
IFRS 2 - Share based payments
The group grants shares to employees under the Jasco Employee Share Incentive
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.
3.Tax effect of the above restatements
www.jasco.co.za
Date: 20/04/2006 07:46:46 AM Produced by the JSE SENS Department
