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Abridged Audited Results For The Year Ended 30 June 2012 And Notice Of Annual General Meeting
JASCO ELECTRONICS HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number 1987/003293/06
Share code: JSC
ISIN: ZAE000003794
(Jasco or the company or the group)
ABRIDGED AUDITED RESULTS for the year ended 30 June 2012 and NOTICE OF ANNUAL GENERAL MEETING
Revenue up 28% Headline Earnings up 38% HEPS up 20%
INTRODUCTION
The group is structured into the three verticals of Information and Communication Technology (ICT) Solutions, Industry Solutions and Energy Solutions.
ICT Solutions contains the telecommunications and information technology businesses of Jasco, Spescom, the newly-acquired ARC Telecoms, as well as the telecommunications arm of associate M-TEC. Industry Solutions contains the Security business and the recently acquired FerroTech, with Energy Solutions containing Electrical Manufacturers and Lighting Structures, as well as the energy arm of M-TEC.
The new structure has allowed for further efficiencies in terms of removing several management positions and de-registering certain legal entities that have become superfluous. Following on the savings made last year, the cost base at the head office has been further reduced by almost 20% this year. Further cost savings are set to be extracted from the business, such as the lower employee costs following rightsizing and the impact of merged businesses and lower compliance and other costs.
FINANCIAL OVERVIEW
Statement of comprehensive income
The groups consolidated revenue increased by 28% to R990 million (2011: R773 million).
Operating profit increased by 8% to R31,2 million (2011: R28,8 million), mainly due to the growth in turnover. However, a number of further cost efficiencies were somewhat offset by costs associated with the repositioning of the Jasco brand and structure to ensure increased customer penetration, as well as once-off retrenchment costs in the ICT Solutions vertical during the second half.
Headline earnings of R23,7 million increased by 38% (2011: R17,2 million) and headline earnings per share (HEPS) was 20% up to 16,8 cents per share (2011: 14,0 cents per share). Earnings per share (EPS) was 101% up to 15,6 cents per share (2011: 7,8 cents per share), despite the weighted average number of shares in issue increasing from 122,7 million to 140,9 million shares due to a full weighting of the share issue in January 2011 relating to the Spescom acquisition. The net positive headline adjustment of R1,8 million related mainly to losses on disposal of fixed assets.
The net finance cost paid of R14,3 million increased from R8,4 million last year. This was slightly below expectation due to higher working capital outflows during the first half. The finance income earned from long term receivables reduced as the capital amount decreased over the period. The main contributor to finance costs was the preference dividend paid to the groups black empowerment partner, AfroCentric, of R7,2 million, which reduced from R7,5 million last year due to lower interest rates.
The equity accounted income from associates of R10,1 million (2011: R4,5 million) improved strongly. This relates mainly to Jascos 51% (2011: 34%) share in M-TECs profit. Although this years result is a pleasing improvement on the previous year, it is still off a low base.
The taxation expense of R7,0 million (2011: R11,4 million) resulted in an effective rate of 25,9% (2011: 45,7%). This is a reduction on the unusually high rate in 2011 and is in spite of the R7,2 million preference dividend (disclosed as interest paid) and R1,0 million STC on the ordinary and preference dividends paid. The group believes its tax rate is likely to remain below 28% over the next two to three years.
Statement of financial position
The most noteworthy change in the statement of financial position as at 30 June 2012 relates to a change in classification of the R100 million preference shares from long term to current due to the technical disclosure requirements of IAS1. This requires that an entity classifies its financial liabilities as current when they could be required to settle within 12 months after the reporting date. Jasco has been in negotiations with AfroCentric for a number of months. As an intermediate step the parties agreed that the earliest redemption due date will be 30 September 2013. This will allow sufficient time to negotiate an alternative form of funding. Pleasing progress has been made in this regard.
Another noteworthy item in the statement of financial position is the change in Jascos ownership in M-TEC from 34% to 51% and the implications on the carrying value of the investment (R190,1 million at 30 June 2012 and R180,4 million at 30 June 2011).
Management has had extensive negotiations with M-TECs fellow share older Taihan Electric Wire Company Limited (Taihan) since April 2012, with the objective of clarifying the rights of the respective shareholders in the ownership structure of the business, including M-TECs debenture instruments. As these negotiations were ongoing at year end, two concurring legal opinions were obtained that confirmed that the debentures, previously treated as equity, will now be treated as debt instruments with effect from the day following their anniversary date of 31 August 2011. The group has followed the legal opinions, and accordingly Jasco is now a de facto 51% shareholder in M-TEC.
In terms of the original shareholders agreement, this change has not resulted in a change in control of the company from Taihan to Jasco. The group continues to believe that a non-controlling stake in this investment is not ideal. This therefore continues to be the subject of negotiation between the parties. Management plans to conclude this in the first half of the new financial year.
An independent expert assessed the carrying value of the investment in accordance with IAS 36. As Jasco now owns 51%, an impairment of the investment was not required. The cumulative historic impairment charges taken of R53,5 million will not be reversed until a sustained improvement in performance is achieved by M-TEC.
A further impact on the statement of financial position has been the disposal of the group's Midrand head office post year end, which is detailed as a subsequent event.
Working capital management remains within target and a pleasing improvement was seen since December 2011 following intense focus by the groups business units. Compared to the position at the 2011 year end, the impact of the volume growth is evident in the net cash outflow of R31 million.
Although net working capital days increased from 30 June 2011, they decreased from 35 days at December 2011 to 32 days at 30 June 2012.
Inventory days increased from 30 to 32 days and accounts receivable days increased from 75 days to 81 days. Accounts payable days increased similarly from 79 to 82 days. The terms from Jascos key trade suppliers will be an area of continued focus in coming months, as additional support will be sought to meet anticipated organic growth requirements.
Inventories on hand was R94,6 million (2011: R79,8 million). The most notable increase in inventory levels of R7 million occurred in the ICT Solutions vertical. The acquisition of Ferrotech contributed R5,3 million.
Trade and other receivables were R244,7 million (2011: R197,0 million). This includes debtor provisions of R6,2 million (2011: R4,7 million). The age profile of the debtors book is on average very healthy, with the only blemish relating to a number of customers in the Lighting Structures sector that were impacted by delays in projects and payments at the major municipalities. The provisions raised are considered adequate to cover specific risk trade receivables identified and any impairment required in terms of IAS39.
Short term non-interest bearing liabilities of R227,2 million (2011: R180,8 million) increased on higher volumes. This also includes trade and other payables (accruals) of R190,2 million (2011: R141,8 million) and provisions of R36,6 million (2011: R38,4 million).
Statement of cash flows
The statement of cash flows reflects an improvement in the cash generated from operations from R3,0 million last year to R24,5 million in 2012. This is a pleasing improvement.
The cash generated was utilised to pay net interest cost of R14,3 million (including the preference dividend), service income tax (R7,8 million), STC (R1,0 million) and ordinary dividends of R3,5 million. As these outflows exceeded the cash generated, it resulted in a net utilisation of R2,1 million (2011: R31,4 million) from operating activities.
The investing activities saw a cash outflow of R22,7 million (2011: R41,2 million inflow), partly funded by an inflow from financing activities of R9,9 million (2011: R22,1 million outflow).
Accordingly, Jascos net overdraft increased from R16,9 million at the beginning of the year to R31,8 million.
OPERATIONAL REVIEW
The group outlines consolidated numbers, as well as aggregated numbers, where applicable. The consolidated revenue includes the full-year contribution from Spescom, six-month contribution from Ferrotech and three-month contribution from ARC Telecoms. The only difference in F2012 between aggregated results and the consolidated results is M-TECs contribution.
ICT SOLUTIONS
ICT - Carrier
Although a slow improvement in spend was seen in the fixed line and mobile markets, growth can be attributed to an improvement in market share.
The aggregated revenue increased by 31% to R558,7 million (2011: R426,7 million), mainly due to the inclusion of the former Spescom business units for a full 12-month period and the improved market share gained from major telecommunications operators. The aggregated operating profit increased by 40% to R32,6 million (2011: R23,2 million) in line with the volume increase on an improved operating margin of 5,8% (2011: 5,4%).
ICT - Enterprise
The growth in volume was largely attributable to the 12-month contribution from the former Spescom business units, supported by the contribution of small bolt-on acquisitions in the second half, such as ARC Telecoms. The corporate market was subdued for most of the year, with signs of some improvement appearing towards the end of the last quarter. The aggregated revenue for the year increased by 85% to R224,8 million (2011: R121,6 million).
The operating profit increased by 46% to R16,4 million (2011: R11,2 million) despite a poor performance in Enterprise Applications (previously Spescom DataVoice), which dragged the operating margin down from 9,2% to 7,3%. Aggressive action was taken and this resulted in additional once-off retrenchment costs of R1,1 million on a 50% reduction in headcount. The lease costs were also substantially reduced in Gauteng and the Western Cape.
INDUSTRY SOLUTIONS
The Industry Solutions vertical experienced an improvement in top line, with the new fire solutions contributing pleasingly. This was supported in the second half by the first-time contribution from Ferrotech (Power Solutions).
Although the slow recovery from the corporate custom million (2011: R107,4 million), whilst operating profit decreased by 16% to R6,6 million (2011: R7,9 million) on the expected lower profit contribution from the groups long term rental receivable that is approaching full term in May 2013.
Although the margin was under pressure in this environment, declining from 7,4% to 5,1%, the cost reductions during last year protected the result to some degree. Cost control remains a key area of focus. The main imperative for this vertical is to grow revenue and further diversify the profile of the groups customer base over the next two years.
ENERGY SOLUTIONS
This division includes the Electrical Manufacturers and Lighting Structures business units on a consolidated basis. On an aggregated basis, M-TECs Electrical division is included, which results in the Energy vertical becoming the largest in the group. Consolidated revenue decreased by 8% to R199,7 million (2011: R218,1 million) due to a sharp decline in volumes in Lighting Structures on lower municipal spend. This continued from the second half of the previous financial year. The aggregated revenue of R1,1 billion (2011: R1,1 billion) clearly shows the significant contribution made by M-TEC. M-TECs contribution increased by 4% to R939,6 million (2011: R899,8 million).
The consolidated operating profit declined sharply by 46% from R29,5 million to R15,9 million, mainly due to the volume drop in Lighting Structures and once-off factory move costs in Electrical Manufacturers. This was exacerbated by strike action in the sector, as well as steel shortages in the first half which resulted in the volumes lost in these manufacturing operations never being recovered.
The aggregated operating profit of R50,2 million declined by 10% from R55,5 million for the same reasons. However, M-TECs operating profit of R34,4 million increased by 32% (2011: R26,0 million) due to a good performance in the Aluminium and Copper products divisions on steady metal prices during the period.
PROSPECTS
The groups focus on M-TEC over the last 12 months resulted in a significant improvement. However, management will focus on working towards operational control and continued improved performance.
In the ICT Carrier segment the group expects to continue its growth drive. Initial results are pleasing, with new customers joining the Jasco fold. In the ICT Enterprise segment the group further anticipates corporate South Africa to increase its spend in the upgrade of the technology in IT and communications infrastructure.
Industry Solutions will continue on its path of growing fire solutions organically and exploiting its new power business through the Ferrotech acquisition. Furthermore, a trend towards energy management is evident and Jasco is well poised to take advantage of this.
In Energy Solutions the group anticipates continued government infrastructure spend. This, together with the state-owned enterprises localisation programme, will bode well for M-TECs energy portfolio. In addition, the group has established Jasco Transmission & Distribution to ensure a larger basket of energy products and solutions to its customers and to drive direct interaction with municipal customers.
The simplification of the Jasco group, with the associated cost reduction, will continue. The deregistration of statutory legal entities that become superfluous will continue into the new year, resulting in a focused Jasco that is fit for purpose.
Finally, the second phase of the groups strategy implementation is well underway. This will ensure that Jasco continues to commit to customer centricity and best-in-class business processes.
Shareholders are advised that any forward looking information or statements contained in this announcement have not been reviewed or reported on by Jascos independent auditors.
SUBSEQUENT EVENT
As previously communicated to shareholders, the management of Jasco has developed a number of key strategies to maximise the return for shareholders. These include the disposal and/or shutting down of non-core and/or underperforming assets.
As announced on 22 June and 13 August 2012, the group is in the process of disposing of the groups Midrand head office property to Genesis Properties (Pty) Ltd for R60 million, plus a R5 million tenant installation allowance. The property will continue to be used as Jascos head office and base of operations in Gauteng. Accordingly, the group has simultaneously entered into a 12-year lease agreement.
The disposal is a key first step in Jascos de-gearing of its balance sheet, as the proceeds on disposal will allow for the settlement of the R30 million mortgage loan. The balance of the proceeds will fund the expected growth requirements of the group. As the effective date of sale is post 30 June 2012, the property (carried at a value of R50 million) has now been classified as a non-curent asset held for sale, and the related mortgage loan was reclassified as a non-current liability held for sale.
The group recently sent a circular to Jasco shareholders requesting the formal approval to dispose of the property and to increase the authorised share capital of Jasco to facilitate the future funding requirements of the group.
Dividend
The board is pleased to announce a final dividend of 3 cents per share to shareholders.
Declaration date Wednesday, 19 September 2012
Last day to trade cum entitlement Friday, 12 October 2012
Shares trade ex entitlement Monday, 15 October 2012
Record date Friday, 19 October 2012
Payment date Monday, 22 October 2012
Shares may not be dematerialised or re-materialised between Monday, 15 October 2012 and Friday 19 October 2012, both dates inclusive.
In terms of the dividend tax effective 1 April 2012, the following additional information is disclosed:
- The local dividend tax rate is 15%;
- No STC credits will be utilised for the final ordinary dividend;
- 146,399,311 ordinary shares are in issue
- The net ordinary dividend is 2,55000 cents per share for ordinary shareholders who are not exempt from dividends tax; and
- Jascos tax reference number is 9300/183/71/3
Changes to the board
The Jasco board wishes to thank Dr Jon Rothbart for his services to the board. He resigned on 8 June 2012. Mr Haroon Moolla has been appointed as chairperson of the social and ethics committee with effect from 1 February 2012.
Notice of AGM
Notice is hereby given that the Annual General Meeting of Jasco shareholders will be held in the companys boardroom, Jasco Office Park, Cnr Alexandra and Second Road, Midrand, on Wednesday 31 October 2012, at 11:00, to transact the business as stated in the notice of the Annual General Meeting to be posted to shareholders on or about 28 September 2012. For and on behalf of the board
Dr ATM Mokgokong (Non-executive chairperson) AMF da Silva (Chief executive officer) WA Prinsloo(Chief financial officer)
19 September 2012
Summarised consolidated statement of comprehensive income
Audited Audited
30 June 30 June
(R'000) 2012 2011 % change
Revenue 989 992 773 038 28,1
Turnover 983 693 763 498 28,8
Finance income 6 299 9 540 (34,0)
Operating profit before
Interest and taxation 31 213 28 802 8,4
Finance income 6 299 9 540 (34,0)
Finance cost (20 581) (17 972) 14,5
Equity accounted income
from associates 10 080 4 506 123,7
Profit before taxation 27 011 24 876 8,6
Taxation (7 009) (11 356) (38,3)
Profit for the year 20 002 13 520 47,9
Other comprehensive income 872 316
Total comprehensive income
for the year 20 874 13 836 50,9
Profit attributable to:
- non-controlling interests (1 933) 3 994 (148,4)
- owners of the parent 21 935 9 526 130,3
Profit for the year 20 002 13 520 47,9
Total comprehensive income attributable to:
- non-controlling interests (1 933) 3 994 (148,4)
- owners of the parent 22 807 9 842 131,7
Total comprehensive for
the year 20 874 13 836 50,9
Reconciliation of headline earnings
Net earnings attributable to owners
of the parent 21 935 9 526 30,3
Headline earnings
adjustments 1 802 7 664 (76,5)
- remeasurement / fair value
adjustment of associate 382 2 787
- gain on bargain purchase (31 714)
- impairment of M-TEC 31 932
- impairment of trade names 4 353
- loss on disposal of fixed assets 1 420 306
Headline earnings 23 737 17 190 38,1
Number of shares in issue ('000) 146 399 146 399
Treasury shares ('000) 5 481 5 481
Weighted average number of shares
on which earnings per share is
calculated ('000) 140 918 122 745
Weighted average number of shares
on which diluted earnings per
share is calculated ('000) 140 918 122 745 14,8
Ratio analysis
Attributable earnings 21 935 9 526 130,3
Earnings per share (cents) 15,6 7,8 100,6
Diluted earnings per share (cents) 15,6 7,8 100,6
Headline earnings per share (cents)16,8 14,0 20,3
Diluted headline earnings
per share (cents) 16,8 14,0 20,3
EBITDA 64 063 53 275 20,2
Net asset value per share (cents) 241,2 29,5 5,1
Net tangible asset value
per share (cents) 148,0 148,3 (0,2)
Dividend per share - final (cents) 3,0 2,5 20,0
Debt: Equity (%) 44,4 43,8 1,3
Interest cover (times) 3,0 4,9 (38,8)
Summarised segmental report
Audited Audited
30 June 2012 30 June 2011
Operating Operating
(R000) Revenue profit/(loss) Revenue profit/(loss)
ICT - Carrier 558 675 32 564 426 705 23 231
ICT - Enterprise 224 849 16 415 121 640 11 213
Industry Solutions 130 065 6 607 107 367 7 922
Energy Solutions 1 139 335 50 219 117 883 5 480
Sub-total
operating
divisions 2 052 924 105 805 1 773 595 97 846
Other 6 691 (35 979) 6 380 (42 746)
Adjustments (1 069 623) (38 613) (1 006 937) (26 298)
Total 989 992 31 213 773 038 28 802
*Segmental revenue and operating profit/(loss) includes the revenue and profit from the associates (ICT Carrier and Energy Solutions) as well as the gross andnet interest on the finance lease receivable (Industry Solutions) and is statedbefore making adjustments for inter-group interest and administration fees.
Summarised consolidated statement of financial position
Audited Audited
30 June 30 June
(R'000) 2012 2011
ASSETS
Non-current assets 414 926 449 504
Property, plant and equipment 57 108 102 685
Intangibles 131 273 114 355
Investment in associates 189 795 180 098
Deferred tax asset 22 119 23 383
Other financial assets 14 631 28 983
Non-current asset held for sale 50 284
Current assets 350 044 304 999
Inventories 94 642 79 824
Trade and other receivables 244 709 196 989
Taxation prepaid 5 195 6 385
Cash and cash equivalents 5 498 21 801
Total assets 815 254 754 503
EQUITY AND LIABILITIES
Share capital and reserves 354 432 343 198
Non-current liabilities 38 534 153 565
Interest bearing liabilities 24 125 136 253
Deferred maintenance revenue 1 719 1 292
Deferred tax liability 12 690 16 020
Non-current liability held for sale 29 976
Current liabilities 92 312 257 740
Interest bearing liabilities 103 184 14 655
Bank overdraft 7 328 38 735
Non-interest bearing liabilities 227 175 180 791
Deferred maintenance revenue 20 247 18 376
Taxation liability 4 378 5 183
Total equity and liabilities 815 254 754 503
Summarised consolidated statement
of changes in equity
Audited Audited
30 June 30 June
(R'000) 2012 2011
Attributable to owners of the parent
Opening balance 323 363 280 132
Issue of share capital 44 008
Treasury shares -Share Incentive Trust 47 1 016
Transactions between shareholders (3 188) (8 100)
Share based payment reserve 336 (189)
Total comprehensive income 22 807 9 842
- Profit for the year 21 935 9 526
- Other comprehensive income 872 316
Dividends paid (3 523) (3 346)
Closing balance 339 842 323 363
Non-controlling interests
Opening balance 19 835 11 579
Subsidiaries acquired during the year (3 838)
Transactions between shareholders (3 312) 8 100
Total comprehensive income (1 933) 3 994
- (Loss)/profit for the year (1 933) 3 994
- Other comprehensive income
Closing balance 14 590 19 835
Total equity 354 432 343 198
Basis of preparation
The abridged consolidated audited financial statements have been prepared in accordance with the International Financial Reporting Standard (IFRS), the AC 500 standards as issued by the Accounting Practices Board and the presentation and disclosure requirements of IAS34 (Interim Financial Reporting), the Listings Requirements of the JSE Limited and the Companies Act (2008) of South Africa. The accounting policies and methods of computation used in the preparation of this report are consistent with those of the previous year.
Audit opinion
The annual financial statements have been audited by the groups independent auditors, Ernst & Young Inc. A copy of their unmodified report is available for inspection at Jascos registered office.
Directors and Secretary
Dr ATM Mokgokong (Chairman), MJ Madungandaba (Deputy Chairman),
JC Farrant*, Sir JA Sherry, M Malebye*, H Moolla*, (NonExecutives),
AMF da Silva (CEO), WA Prinsloo (CFO) (Executives), S Lutchan
(Company Secretary).
*Independent
Registered office
Jasco Park, C/O 2nd Road & Alexandra Avenue, Midrand, 1685
Transfer secretaries
Link Market Services SA (Pty) Ltd, 13th Floor Rennie House,
19 Ameshoff Street, Braamfontein, 2001
Sponsor
Grindrod Bank Limited, Building 3, 1st Floor, North Wing,
Commerce Square, 39 Rivonia Road, Corner Helling Road,
Sandton 2156
More information is available at: www.jasco.co.za
Date: 19/09/2012 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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