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Abridged Results for the year ended 30 June 2022
Jasco ELECTRONICS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1987/003293/06
JSE share code: JSC
ISIN: ZAE000003794
("Jasco" or "the Group")
ABRIDGED RESULTS FOR THE YEAR ENDED 30 JUNE 2022
HIGHLIGHTS
* New equity raised of R47,2 million through a rights issue
* Increase in cash and cash equivalents by R9,0 million
* Improvement of debt:equity ratio to 118.2%
INTRODUCTION
Jasco's 46th year was no less challenging than the preceding year, with
the lasting social and economic impact of the COVID-19 restrictions
evident through the volatile social unrest in July 2021 across mainly
KwaZulu-Natal and certain parts of Gauteng. This was followed by a
national labour strike in October 2021 and natural disasters such as the
flooding in KwaZulu-Natal in April 2022, which caused significant
disruptions to the key port of entry for imported goods in Durban.
CONTEXT TO THE RESULTS
With effect from 1 June 2022, Jasco sold its investment in Jasco Property
Solutions (JPS) to Reach Group.
The comparative information has been restated to include JPS in
discontinued operations to enable a like-for-like comparison.
Very disappointingly, the group uncovered gross misconduct by the
leadership team in the Security & Fire Solutions business. Immediate
action was taken, with the team members no longer at the group.
Manufacturing was severely impacted by the social unrest, the national
strike and a plant level strike between March and June 2022, resulting
in significant losses.
ADDRESSING THE GROUP'S SUSTAINABILITY
Management's key actions during the year included:
Debt restructure and capital raise
Jasco successfully concluded a rights issue on 7 February 2022, raising
R47,2 million net of costs. Following the rights issue, the corporate
bond was fully settled through a set-off of R20,0 million and the Bank
of China (BoC) loan was reduced by R20,0 million. From January 2022,
monthly capital repayments commenced, which has reduced the capital
amount owing to R108 million at year-end.
Addressing the underperforming businesses
Due to the significant operating losses caused by the strike in
Manufacturing, a Section 189 review of the business commenced. The
operation is being repositioned in response to the existing customer
demand and market conditions.
To prevent ongoing pressure on the rest of Jasco, a decision was taken
to restructure Security & Fire and to exit the loss-making fire segment.
FINANCIAL RESULTS
Revenue of R662,3 million improved by 1.1% (2021: R654,9 million). The
gross profit deteriorated by 14.5% to R173,8 million (2021: R203,2
million) due to the operating gearing effect from the lower volumes in
Security & Fire and Manufacturing.
Operating profit decreased by 40.1% to R3,2 million (2021: R5,3 million),
mainly due to the losses suffered by Security & Fire and Manufacturing.
Net finance costs of R16,5 million decreased from the corresponding
period's R24,0 million, following the reduction in debt.
The profit from discontinued operations of R1,3 million (2021: R32,5
million) consists of JPS's operating loss (R0,3 million) and the profit
on disposal (R1,6 million).
Earnings per share decreased to a loss of 5.9 cents per share (2021:
profit of 2.9 cents per share).
Headline earnings per share decreased to 6.4 cents loss per share from
0.6 cents loss per share for 2021. The weighted average number of shares
in issue increased to 278.6 million shares following the rights issue
on 7 February 2022 (2021: 224.2 million shares).
Cash generated from operating activities (continuing and discontinued)
reflected an inflow of R16,5 million (2021: R13,3 million outflow). The
cash inflow from investing activities amounted to R5,4 million (2021:
R73,3 million). Cash flows from financing activities reflected an outflow
of R12,9 million (2021: R57,6 million). The net closing cash balance of
R29,4 million increased from R20,4 million on 30 June 2021.
SUBSEQUENT EVENTS
Following the disposal of the Midrand property by the previous owner to
Community Investment Holdings (CIH) Projects No. 55 (Pty) Ltd, Jasco
entered into a new lease agreement with CIH Projects, with an effective
date of 7 July 2022. This was approved by the shareholders in a General
Meeting on 15 September 2022. To assist the group with its future
operating cash flows, CIH Projects has agreed to a rental payment holiday
for a period of 12 months.
Due to the losses suffered by Security & Fire, a restructure of this
business commenced on 1 August, and the group will exit the fire segment
of the business. This is in line with the group's core strategy of
providing technology solutions to its market.
Jasco is continuing its negotiations with various commercial banks to
replace the Bank of China. However, this can only be concluded after the
audited financial results for June 2022 are available.
SOLVENCY, LIQUIDITY AND GOING CONCERN
At 30 June 2022, the group had accumulated losses of R268,5 million
(2021: R252,2 million), with the group reporting a loss of R16,3 million
(2021: profit of R6,5 million). This casts doubt on the group's ability
to continue as a going concern.
Based on the support received from CIH Projects, the restructure of
Security & Fire, the expected recovery in Manufacturing and the
anticipated revenue for the group, the directors believe there is
sufficient financing available to continue the business of the group.
The financial statements have accordingly been prepared on a going
concern basis.
GROUP OUTLOOK
The economic outlook remains extremely uncertain, with the local and
international environment impacted by several factors, ranging from
political instability, inflationary pressures, unreliable electricity
supply and supply chain shortages and delays.
Jasco's most pressing issue remains its high levels of debt and its
financial underperformance. Further debt reduction will be required,
either through another capital injection by its major shareholder/s or
the potential disposal of another profitable business.
In the event of another capital raise, and if the group's major
shareholder invests further either with limited or no equity
contributions from the rest of the shareholders, the free float trading
on the stock exchange may fall to unacceptably low levels in terms of
the JSE Listings Requirements. This could trigger an assessment of the
viability of remaining listed on the stock exchange. Shareholders will
be updated on the board's decisions in this regard.
AUDIT OPINION
The external auditors issued an unqualified audit report on the
underlying audited financial statements with an emphasis of matter
related to going concern, as detailed below and with the recognition of
the deferred tax asset and goodwill assessment as key audit matters.
Material uncertainty related to going concern
Without modifying our conclusion above, we draw attention to the note
headed 'Solvency, liquidity, and going concern' of the consolidated
annual financial statements, in which it is stated that the ability of
the group
to continue as a going concern is dependent on the continued support of
its major shareholder and the forecast cash flows from operations for
the next 12 months. These events or conditions indicate that a material
uncertainty exists that may cast significant doubt on the group's ability
to continue as a going concern.
A copy of the audit opinion together with the audited consolidated annual
financial statements for the year ended June 2022, is available for
inspection at Jasco's registered office and on our website
www.jasco.co.za.
CHANGES TO THE BOARD
The board appointed Dr ND Munisi as a non-executive director and member
of the investment committee with effect from 1 July 2022.
DIRECTORS' STATEMENT OF RESPONSIBILITY
This short-form announcement is the responsibility of the directors
and is only a summary of the information in the full announcement and
does not contain full or complete details. The full announcement can
be found on the company's website at www.jasco.co.za or
https://senspdf.jse.co.za/documents/2022/jse/isse/JSC/JSC2022.pdf.
Copies of the full announcement may also be requested at the company's
registered office and at the office of the sponsor, at no charge, during
office hours. Any investment decision should be based on the full
announcement and consolidated annual financial statements published on
the company's website.
For and on behalf of the board
Dr ATM Mokgokong WA Prinsloo LA Prigge
(Non-executive chairman) (Chief executive officer) (Chief financial
officer)
5 October 2022
Directors and Secretary: Dr ATM Mokgokong (Chairman), MJ Madungandaba
(Deputy Chairman), DH du Plessis*, MSC Bawa*, PF Radebe*, TP Zondi*, Dr
ND Munisi (Non-Executive) AMF da Silva (Alternate Non-executive), WA
Prinsloo (CEO), LA Prigge (CFO) MCP Managerial Services (Pty) Limited
(Company secretary) *Independent
Registered office: Jasco Park, c/o 2nd Street and Alexandra Avenue,
Midrand, 1685
Transfer secretaries: JSE Investor Services (Pty) Limited, 13th Floor,
Rennie House, 19 Ameshoff Street, Braamfontein, 2001
Sponsor: Grindrod Bank Limited, Fourth Floor, Grindrod Tower, 8A Protea
Place, Sandton, 2146
Date: 05-10-2022 07:05:00
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