| Thu 5 Oct 2006, 9:00 | | Jasco Electronics Holdings Limited - Unaudited res |
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Jasco Electronics Holdings Limited - Unaudited results for the six months
ended 31 August 2006
Jasco Electronics Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 1987/003293/06
Share code: JSC ISIN: ZAE000003794
Unaudited results for the six months ended 31 August 2006
Summarised consolidated income statements
Unaudited Unaudited
6 months 6 months
ended ended % Audited
31 August 31 August change 28 February
(R"000) Note 2006 2005 2006
Revenue 178 075 150 858 18,0% 334 402
Turnover 176 753 149 720 18,1% 332 169
Interest 1 322 1 138 2 233
received
Operating 13 025 10 326 26,1% 28 106
profit
Interest 1 322 1 138 16,2% 2 233
received
Operating
profit before
interest paid
and
taxation 14 347 11 464 25,1% 30 339
Interest paid (1 553) (1 373) 13,1% (3 025)
Net profit 12 794 10 091 26,8% 27 314
before taxation
Taxation (4 440) (3 289) 35,0% (9 177)
Net profit 8 354 6 802 22,8% 18 137
after taxation
Profit from 15 - -
associated
company
Profit for the 8 369 6 802 23,0% 18 137
period/year
Reconciliation
of headline
earnings
Net earnings
attributable to
ordinary
shareholders 8 369 6 802 23,0% 18 137
Headline - 517 1 046
earnings
adjustments
- impairment of - 87 610
goodwill
- reversal of - 430 436
currency
translation
reserve
Headline 8 369 7 319 14,3% 19 183
earnings
Number of ("000) 69 431 69 333 69 431
shares in issue
Treasury shares ("000) 354 119 119
Number of
shares on which
earnings
per share is ("000) 69 077 69 214 69 312
calculated
Number of
shares on which
diluted
earnings per ("000) 98 962 99 099 99 197
share is
calculated
Ratio analysis
Attributable (R"000) 8 369 6 802 23,0% 18 137
earnings
Earnings per (cents) 12,1 9,8 23,5% 26,2
share
Diluted (cents) 8,5 6,9 23,2% 18,3
earnings per
share
Headline (cents) 12,1 10,6 14,2% 27,7
earnings per
share
Diluted (cents) 8,5 7,4 14,9% 19,3
headline
earnings per
share
EBITDA 14 587 13 030 12,0% 33 442
Net asset value (cents) 157,3 138,2 13,8% 154,3
per share
Net tangible (cents) 104,4 84,7 23,3% 101,5
asset value per
share
Dividend per (cents) - - -
share - interim
- final (cents) - - 9,0
Debt:Equity (%) - 2,8 -
Interest cover (times) 56,4 43,9 28,5% 31,7
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 Unaudited Audited
31 August 31 August 28 February
(R"000) 2006 2005 2006
ASSETS
Non-current assets 73 342 63 751 62 410
Plant and equipment 21 622 17 241 17 441
Intangibles 36 570 37 093 36 570
Deferred lease income - 112 -
Deferred tax asset 7 964 9 301 8 395
Investments and loans 7 186 4 4
Current assets 119 062 101 833 111 753
Inventories 35 009 33 635 41 202
Trade and other receivables 70 965 68 198 55 871
Cash and cash equivalents 13 088 - 14 680
Total assets 192 404 165 584 174 163
EQUITY AND LIABILITIES
Share capital and reserves 108 687 95 685 106 944
Non-current liabilities 474 3 414 1 497
Interest bearing liabilities 175 2 310 1 198
Non-interest bearing 299 1 104 299
liabilities
Current liabilities 83 243 66 485 65 722
Interest bearing liabilities - - 341
Non-interest bearing 83 243 66 073 65 381
liabilities
Bank overdraft - 412 -
Total equity and liabilities 192 404 165 584 174 163
Note: 1. The investments and loans represent the transfer of stock, fixed
assets and capital funding to the WebbLeBLANC joint venture which is equity
accounted.
Statements of changes in equity
Unaudited Unaudited
6 months 6 months
ended ended Audited
31 August 31 August 28 February
(R"000) 2006 2005 2006
Opening balance 106 944 92 870 92 870
Share premium - (300) (300)
Treasury shares - Share (414) 28 (84)
Incentive Trust
Loss on translation of foreign - - (6)
subsidiary
Reversal of currency - 430 436
translation reserve
Profit for the period/year 8 369 6 802 18 137
Dividends paid (6 212) (4 166) (4 166)
Share based payment reserve - 21 57
Closing balance 108 687 95 685 106 944
Summarised consolidated cash flow statements
Unaudited Unaudited
6 months 6 months
ended ended Audited
31 August 31 August 28 February
(R"000) 2006 2005 2006
Cash generated from operations 14 801 4 082 23 373
Net financing costs (231) (235) (792)
Net taxation paid (943) (693) (1 145)
Dividends paid (6 198) (4 156) (4 166)
Cash flow from operating 7 429 (1 002) 17 270
activities
Cash flow from investing (7 586) (4 943) (7 012)
activities
Cash flow from financing (1 436) 248 (863)
activities
(Decrease)/increase in cash (1 593) (5 697) 9 395
resources
Summarised segmental reports
for the six months ended 31 August 2006, 31 August 2005, and the year ended 28
February 2006
(R"000)
31 August Telecoms Manu- Security Sub total Other Total
2006 facturing operating
(Unaudited) divisions
Revenue 98 692 52 653 25 408 176 753 1 322 178
075
Operating 13 552 5 862 1 017 20 431 (7 13 025
profit* 406)
(R"000)
31 August Telecoms Manu- Security Sub total Other Total
2005 facturing operating
(Unaudited) divisions
Revenue 84 308 40 268 24 006 148 582 2 276 150
858
Operating 10 770 5 041 1 740 17 551 (7 10 326
profit* 225)
(R"000)
28 February Telecoms Manu- Security Sub total Other Total
2006 facturing operating
(Audited) divisions
Revenue 191 956 85 925 54 629 332 510 1 892 334
402
Operating 23 436 11 632 3 801 38 869 (10 28 106
profit* 763)
* The divisional operating profit excludes interest paid or received and is
stated before making adjustments for inter-group interest and administration
fees.
Introduction
The Jasco board has pleasure in presenting the unaudited results for the six
months ended 31 August 2006. The increase in earnings per share of 23,5% to
12,1 cents per share for the period under review (2005: 9,8 cents per share)
follows on the 61% earnings per share growth achieved during the 2006
financial year to 28 February 2006. These results are in line with the trading
update issued on 28 September 2006.
Results
Revenue continued its upward trend, increasing by 18% to R178,1 million (2005:
R150,9 million). The majority of the 18% growth came from an increase in
volumes, with only about 6% of this growth attributable to an improvement in
selling prices.
It is important to note that the revenue from the group"s Mast & Towers
telecommunications business unit is excluded from this year"s revenue line as
it now forms part of a successfully integrated WebbLeBLANC joint venture and
is equity accounted. Like-for-like growth in revenue was therefore 26,4%.
Continued increased efficiencies resulted in an improvement in operating
margin before interest paid from 7,6% to 8,1%. Net profit before taxation grew
by 26,8% to R12,8 million (2005: R10,1 million). After providing for taxation,
earnings per share increased by 23,5% to 12,1 cents per share (2005: 9,8 cents
per share).
The results for the period under review included a once-off amount of R1,4
million spent on a detailed due diligence process relating to the possible
acquisition of a substantial business that would have almost doubled Jasco"s
size, converted the group into an unconditionally black owned entity and
broadened its customer base and product range. However, as outlined in the
group"s withdrawal of its cautionary on 15 June 2006, based on the due
diligence process, the Jasco board found that the value/reward ratio was not
acceptable and that the transaction would not be in the best interest of
shareholders. Excluding this once-off expense, the growth in earnings per
share would have been 43%.
The group"s calculated tax rate was 34,7%, which is the average taxation rate
expected for the full year. This rate includes STC of 12,5% on the dividend
relating to the prior year, paid during this period. It also takes into
account the estimation of non-tax deductible expenses, such as the once-off
acquisition expense referred to above.
Headline earnings per share increased by 14,2% to 12,1 cents per share
(2005:10,6 cents per share). There were no headline earnings adjustments in
the current period, compared to the R0,5 million adjustment in the
corresponding period.
The higher levels of profitability improved the net tangible asset value per
share by 23,3% to 104,4 cents (2005: 84,7 cents).
The group achieved strong generation of cash from operations during the period
under review. Cash from operations amounted to R14,8 million (2005: R4,1
million), which is 114% of operating profit before net financing costs.
The strong cash generation is also reflected in the decrease in average net
working capital days to 31 days (2005: 39 days). This decrease is the result
of a lower increase in stock and debtors than the increase in revenue, further
enhanced by an improvement in creditors largely due to the timing of payments.
It should be noted that these levels are now well below Jasco"s target net
working capital days of 45 and that an increase can be expected in future.
Basis of preparation
The abridged financial statements have been prepared in terms of IFRS and in
compliance with IAS 34 - Interim Financial Reporting.
Operational review
The divisions" contribution to group revenue and operating profit is
calculated as a percentage of the revenue and operating profit from operating
divisions. In the period under review, revenue from operating divisions was
R176,8 million and operating profit R20.4 million as per the segmental report.
Telecommunications
The Telecommunications division remains the largest division in the group,
contributing 55,8% (2005: 56,7%) to revenue from operating divisions. It
focuses on providing solutions, products and services to the access networks
of both fixed line and wireless telecommunications network operators through a
combination of in-house products and strategic products sourced on an
exclusive basis from leading overseas suppliers.
The division consists of three independent operations: Webb Industries,
Tasslelane and Telesciences. Over the last few years Jasco has deliberately
positioned these businesses to benefit from the current buoyant market in
telecommunications, private mobile radio and GSM.
Revenue increased by 17,1% to R98,7 million, whilst operating profit grew by
25,8% to R13,6 million (2005: 10,8 million), contributing 66,3% (2005: 61,4%)
to operating profit from the divisions. The division showed a pleasing
improvement in operating margin from 12,8% to 13,7%. The increase in revenue
and operating margin was achieved through continued strong performances from
all three operations against a buoyant telecommunications sector, assisted by
the exclusion of the lower margin Mast & Towers division from this year"s
results following its successful integration with that of LeBLANC
Communications.
During the period under review, the group placed particular emphasis on
ensuring that all three business areas in Telecommunications continuously
improve cross-business synergies to tap into robust fixed line expenditure,
driven by broadband demand, strong growth in GSM roll-outs into Africa and
Private Mobile Radio volumes driven by the security demand in South Africa.
Manufacturing
The group"s Manufacturing division consists of two operations, Special Cables
and the newly-acquired T Components. Both operate from factories in Kwazulu-
Natal. Special Cables continues to manufacture and assemble wire harnesses and
plastic moulded components for large domestic appliances, pool products and
niche automotive control units/sub-assemblies, whereas T Components
specialises in the pressing of steel and metal components for application in
the electrical sector. These products supplement Special Cable"s wire
products. T Components was acquired effective 1 July 2006 and the purchase
consideration was settled in cash. The acquisition of this R17 million annual
turnover business expands Jasco"s customer base, widens its product offering
and will bring much-needed increase in capacity through more human resources
and additional factory space.
Manufacturing"s revenue increased by 30,8% to R52,7 million (2005: R40,3
million) and now represents 29,8% (2005: 27,1%) of revenue from operating
divisions. The continued growth resulted from a healthy economic environment,
the ongoing electrification of previously neglected areas, the increase in
product lines at Special Cables and the inclusion of T Components" results for
two months.
Operating profit increased by 16,3% to R5,9 million (2005: R5,0 million),
which represents 28,7% of operating profit from divisions. Operating margins
have however come under pressure due to the inability to fully pass on
excessive world copper and oil price increases to Jasco"s customers. This
resulted in margins decreasing from 12,5% to 11,1%.
To address the margin pressure, the group has increased prices with effect
from 1 August 2006 and is looking for alternative suppliers to reduce the cost
of imported goods. Input prices are also reducing, which will assist in
relieving margin pressure going forward. The T Components" factory will be
moved into a building next to the group"s existing factory and systems and
controls to increase the efficiencies of this factory will be implemented. The
group is confident that these initiatives will improve the margins in this
division during the second half of the year.
Security
The Security division offers electronic security solutions as integrators of
stand-alone and integrated closed circuit television networks (CCTV), access
control, pneumatic tube and alarm monitoring systems.
This division previously operated as three stand-alone business units, namely
Multivid, Scaffel and Aerocom. With effect from 1 September 2006, Aerocom no
longer operates as a separate business unit, but has been incorporated into
Multivid as a product line. As a result, Jasco will retain the agency and
still be able to offer this product to its customers, whilst optimising
resources.
Security had a disappointing first half, with general underperformance
preventing the achievement of the business plan. The contribution to revenue
from operating divisions therefore decreased from 16,2% to 14,4%. Although
revenue increased slightly to R25,4 million (2005: R24,0 million), the lack of
meaningful project business impacted on operating profit, which was down from
R1,7 million last year to R1,0 million this year. This resulted in a drop in
margins to 4% from the 7,2% reported in the corresponding period last year.
Following the retirement of the divisional CEO and founder of Multivid, the
group restructured the management team and appointed a new CEO. The new CEO
will focus on the implementation of an enhanced incentive model and training
programmes for the operational staff and the improvement of sales through the
strengthening of the sales team. Whilst this division still has to rectify a
number of operational issues, the group is optimistic about the strong
opportunities in the sector in the build up to the 2010 Soccer World Cup and
beyond.
Prospects
The group"s strategy to grow Jasco both organically and through strategic
acquisitions remains in place, even though only a small acquisition was
concluded in the period under review. Jasco remains committed to implementing
a responsible acquisition strategy that will lead to long-term growth in
shareholder value. The group has no gearing, which places it in a solid
position to capitalise on relevant market opportunities as they arise.
Prospects remain positive in the areas where the group operates. Jasco expects
expenditure in the telecommunications sector to remain strong on the back of
the current liberalisation taking place in this sector in South Africa, whilst
the rollout of new GSM networks on the African continent continues. Volume and
margin opportunities will also be provided by communications players" move
towards full-solution sourcing, government"s commitment to infrastructure
spend and the expansion of the group"s high-site coverage.
The demand for components from manufacturers of domestic appliances and
automotive products in the local market remains at high levels, evidenced by
the growth in Manufacturing revenue. Although the rate of growth in these
markets may slow in F2008 as a result of interest rate increases, volumes
should be supported by demand as a result of the continued electrification
initiative in South Africa.
As mentioned above, the group is confident that its focus on improving
Security, new management and other efficiency drives will allow this division
to benefit from government"s commitment to infrastructure development and the
emphasis on electronic security as a means to curtail crime in South Africa.
In the absence of any unforeseen circumstances, management therefore expects
further group earnings growth during the second half of the year.
Directors and Secretary
During the period under review, MJ (Joe) Madungandaba resigned as Chief
Executive Officer to take up the position of Non-Executive Deputy Chairperson,
whilst MH (Martin) Lotz, previously the Chief Operating Officer, was appointed
as the Chief Executive Officer. WA (Warren) Prinsloo was appointed as
Financial Director and MW (Motlatsi) Lekhesa was appointed as Company
Secretary. Further details can be found on our website www.jasco.co.za
For and on behalf of the Board
Dr A T M Mokgokong M H Lotz WA Prinsloo
(Non-Executive (Chief Executive (Financial Director)
Chairperson) Officer)
5 October 2006
Directors Dr ATM Mokgokong (Chairperson), MJ Madungandaba (Deputy
Chairperson), PS Chapwanya#, FE Emary, JC Farrant, Dr JM Matsipa, JA Sherry
(Non-Executives), MH Lotz (CEO), WA Prinsloo (Financial Director) (Executives)
# (Zimbabwean)
MW Lekhesa (Company Secretary)
Registered office Woodmead Park, 8 Saddle Drive, Woodmead 2157
Transfer secretaries Link Market Services SA (Pty) Ltd, 11 Diagonal Street,
Johannesburg 2001
Further details can be found on our website www.jasco.co.za
Date: 05/10/2006 09:00:14 AM Produced by the JSE SENS Department
