DIVERSIFICATION PAYS OFF FOR JASCO
FURTHER DIVERSIFICATION CONTINUES TO PAY OFF FOR JASCO ELECTRONICS HOLDINGS
Strong interim results to 31 August 2008
Highlights
· Diversification of earnings and customer base again delivered
· No customer contributing more than 20% to revenue or profit
· Earnings per share increased by 38%
· Improved margins across the board
· New acquisition, M-TEC, earnings enhancing
Financial summary
· Revenue decreased slightly to R248,9 million (2007: R252,9 million)
· Earnings per share (EPS) increased by 38% to 23,4 cents per share (2007: 16,9 cents per share)
· The group’s earnings more than compensated for the issue of additional ordinary shares during this period in terms of the group’s Black Economic Empowerment (BEE) transaction of March 2003 with Community Investment Holdings (CIH)
· Operating profit increased by 51%
· This increase in the operating profit before interest and taxation came from only the historic Jasco divisions, indicating robust organic growth
· Operating margins improved in all divisions, resulting in a healthy increase in group margin
· Group margins from historic business operations increased to 10,4% (2007: 6,7%)
· The three-month contribution from the recently acquired associate company, Malesela Taihan Electric Cable (Pty) Ltd (M-TEC) further increased operating margins to 13,6%
· Cash generated from operations before working capital increased by 51% to R28,6 million (2007: R18,9 million)
· After providing upfront funding of R21 million for a R45 million Security rental contract, payment of dividends (R10,9 million), taxation (R6,0 million) and the net outflow of R28,6 million in investments in fixed assets and the M-TEC acquisition, the group ended the period with a small temporary overdraft of R10,7 million. The revenue and the resulting profit of the Security rental contract will be realised in the second half of this year. In line with the group’s historic trend of strong cash generation, the overdraft is expected to be fully paid off by 30 June 2009
Operational summary
· Revenue in Telecommunications remained flat at R143,3 million (2007: R144,5 million) due to temporary delays in orders for broadband solutions from operators in
· The turnaround in Security is now complete, with a 33% increase in revenue to R47,5 million (2007: R35,7 million) and a more than fourfold increase in operating profit to R5,9 million (2007: R1,3 million). Margins jumped from 3,7% to 12,3%
· In Domestic Products, a concerted effort to reduce costs and improve efficiencies in a tough market allowed the group to minimise the decline in operating profit to 7% (R5,3 million versus R5,7 million in 2007) against a 20% revenue decline to R56,7 million (2007: R70,5 million). Operating margin pleasingly improved to 9,3% (2007: 8,0%)
· The newly-created Electrical division consists of Jasco’s investment in cable manufacturer, M-TEC, from 1 June 2008. Jasco owns 51% of the ordinary and preference shares in M-TEC, with Taihan of South Korea, one of the top 10 cable manufacturing companies in the world, owning the balance. The contribution for the last three months was within expectations, with Jasco’s after tax share of profits for three months totalling R7,8 million
· The turnaround in Security is now complete, with a 33% increase in revenue to R47,5 million (2007: R35,7 million) and a more than fourfold increase in operating profit to R5,9 million (2007: R1,3 million). Margins jumped from 3,7% to 12,3%
· In Domestic Products, a concerted effort to reduce costs and improve efficiencies in a tough market allowed the group to minimise the decline in operating profit to 7% (R5,3 million versus R5,7 million in 2007) against a 20% revenue decline to R56,7 million (2007: R70,5 million). Operating margin pleasingly improved to 9,3% (2007: 8,0%)
· The newly-created Electrical division consists of Jasco’s investment in cable manufacturer, M-TEC, from 1 June 2008. Jasco owns 51% of the ordinary and preference shares in M-TEC, with Taihan of South Korea, one of the top 10 cable manufacturing companies in the world, owning the balance. The contribution for the last three months was within expectations, with Jasco’s after tax share of profits for three months totalling R7,8 million
Commenting on the results, Jasco CEO Martin Lotz, said:
“We are extremely pleased with these results, achieved against tough market conditions. These numbers prove the success of our diversification strategy, as a decrease in fixed line in Telecommunications was balanced by growth in wireless and declining revenue in the Domestic Products division was more than offset by growth in Security.
“During the last six months, we concentrated on improving efficiencies, implementing cost savings and increasing selling prices to mitigate inflationary cost pressures. These actions - together with a favourable swing in the sales mix towards higher margin and value add solutions in both the Telecommunications and Security divisions and a significantly increased contribution from Jasco’s 50% share in WebbLeBLANC - resulted in the 51% increase in operating profit and improved margins across the board.”
Going forward, Lotz said:
“We are excited about the growth prospects for Jasco. We are extremely well positioned to access the growing infrastructure market in , with almost 90% of revenue derived from high growth, infrastructure-related markets such as telecommunications, power and 2010 projects. With our earnings base now even more diversified and the group being bigger and black owned after our transaction with M-TEC and AfroCentric earlier this year, we are looking forward to continued earnings growth for the 12 months to 28 February 2009.”
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