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Disposal of automotive business
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”)
DISPOSAL OF AUTOMOTIVE BUSINESS
1. Introduction
1.1. Shareholders are referred to the financial results announcement for the year ended 30 June
2013 published on the Stock Exchange News Service of the JSE Limited on 18 September 2013,
wherein shareholders where reminded that Jasco had entered the final year of its planned three-
year restructuring programme. As part of the final stage of this three year programme, Jasco is
focusing on exiting low-value manufacturing businesses and closely monitoring previously
identified and potential non-performing businesses in the Jasco group. In this regard, Jasco
wishes to advise that the Company has entered into an agreement with Lumen Special Cables
Proprietary Limited (“Lumen”), in terms of which Jasco will sell, as a going concern, the
business, assets and liabilities of its automotive parts business (“Automotive Division”), to
Lumen for a cash consideration of R12 628 000 (“the Disposal”). The Automotive Division is
housed under Jasco Trading Proprietary Limited, a wholly-owned subsidiary of Jasco, which
trades, inter alia, as Jasco Electrical Manufacturers. Lumen represents the South African
operations and a newly formed subsidiary of Lumen International Holdings Limited, an Australian
based global supplier of wiring looms, electronic systems and plastic components to vehicle
manufacturers and to the automotive aftermarket around the world.
2. Nature of business of the Automotive Division
2.1. Based in KwaZulu-Natal, Jasco Electrical Manufacturers is an electrical manufacturer of
domestic appliance parts, adaptors, plugs and extensions and various components to the
domestic appliance, automotive and leisure industries.
2.2. The Automotive Division represents a small part of Jasco Electrical Manufacturers and its
business entails the manufacturing and offering of various automotive and related products.
These products include electrical harnesses for tow bars, as well as air conditioning modules
mainly for the automotive industry.
3. Rationale for the Disposal
The Disposal provides Jasco with an opportunity to exit from non-core business units and to
position the remaining core business base to achieve sustainable future growth. This is in line
with the objectives set out in the group’s three-year restructuring programme.
Lumen is a key supplier of wiring components for the manufacturing of harnesses to several
international customers with South African representation. This transaction will enable Lumen to
expand their current international network to service the South African market and penetrate the
African market.
4. Salient features of the Disposal
4.1. Disposal Consideration
4.1.1.In terms of the Disposal, Jasco will sell, as a going concern, the Automotive Division
including contracts, book debts, fixed assets, stock, intellectual property, goodwill and
trade creditors to Lumen for a total disposal consideration of R12 628 000, to be settled
in cash. The final disposal consideration will be determined on the Effective Date by
reference to the net asset value of the Automotive Division as at the Effective Date.
4.1.2.If the net asset value of the Automotive Division as at the Effective Date:
(1) is less than the net asset value as at 31 August 2013, the disposal consideration
will automatically be reduced by the amount of the shortfall; and
(2) is more than the net asset value as at 31 August 2013, the disposal
consideration will automatically be increased by the amount of the difference,
provided that the difference shall not exceed R2 000 000.
4.1.3.The net asset value of the Business as at 31 August 2013 has been calculated as
R6 526 000.
4.2. Use of Proceeds
4.2.1.
In line with Jasco’s restructuring programme and ongoing strategy, proceeds of the
Disposal will be utilised by Jasco to de-leverage the Group’s balance sheet and assist in
the reduction of the interest burden on its cash flows.
4.3. Effective date
4.3.1. The effective date is either 31 January 2014 or the date at which all outstanding
conditions precedent have been fulfilled or waived (“Effective Date”).
4.4. Conditions Precedent
The Disposal is subject to the fulfilment of the following outstanding conditions precedent:
4.4.1.a cession and delegation of material contracts to Lumen with effect from the Effective
Date or in the alternative, Jasco concluding a new contract with the other party/ies to
each of the material contracts upon terms acceptable to Lumen in substitution for the
relevant existing material contracts;
4.4.2.the approval of the relevant exchange control from the South African Reserve Bank;
and
4.4.3.to the extent necessary, all such other regulatory approvals.
5. Pro forma financial effects
The pro forma financial effects, for which the directors are responsible, are provided for
illustrative purposes only to show the effect of the Disposal on the earnings, headline earnings,
diluted earnings and diluted headline earnings per share as if the Disposal had taken effect on 1
July 2012 and to show the effect on the net asset value and net tangible asset value per share as
if the Disposal had taken effect on 30 June 2013. Because of their nature, the pro forma
financial effects may not give a fair presentation of the financial position and performance of the
Jasco group. The pro forma financial effects have been compiled from the published audited
financial statements of Jasco and its Associated Companies, as well as a rights offer circular
recently issued by the Company. The financial effects are presented in a manner consistent with
the format and accounting policies adopted by Jasco and have been adjusted as described in the
notes.
Before After
(Published) (Pro forma) Change Change
(1) (2, 3)
(cents) (cents) (cents) (%)
Earnings per share (“EPS”) -50.0 -47.8 2.2 4.38%
Headline Earnings per share (“HEPS”) 1.8 0.4 -1.4 -76.79%
Diluted earnings per share -50.0 -47.8 2.2 4.38%
Diluted headline earnings per share 1.8 0.4 -1.4 -76.79%
Net asset value per share (“NAVPS”) 129.0 140.1 11.1 8.58%
Net tangible asset value per share
(“NTAVPS”) 84.9 96.0 11.1 13.04%
Weighted average number of shares
in issue (‘000) 213 282 436 213 282 436 - -
Diluted weighted average number of
shares in issue (‘000) 213 282 436 213 282 436 - -
Actual number of shares in issue
(‘000) 218 399 311 218 399 311 - -
Notes:
(1) The “Before Published” financial information has been extracted, without adjustment, from
Jasco’s published pro forma financial effects contained in the rights offer circular issued by
the Company dated 13 December 2013.
(2) For the purposes of calculating EPS, HEPS, diluted EPS and diluted HEPS, the Before and
After pro forma figures are based on the weighted average number of shares in issue of
213,282,436. Furthermore, the following key assumptions have been made in the
calculation of the pro forma figures:
a. The Disposal became effective on 1 July 2012 for the statement of
comprehensive income and the Disposal consideration was received on that
date;
b. The Disposal consideration of R12 628 000 was received in cash;
c. The adjustments reflect the net after tax profit arising from the Disposal,
amounting to R7 620 000 and the after tax profit contribution of the Automotive
Division of R3 714 000 attributable to Jasco for the financial year ended 30 June
2013. These figures have been calculated from the unaudited statement of
comprehensive income and statement of financial position of the Automotive
Division and extracted from the unaudited management accounts of the
Automotive Division. The Board of Jasco is satisfied with the quality of the
unaudited management accounts of the Automotive Division;
d. The next pre-tax interest cost saving totaling R1 073 000 arose due to the
utilisation of the Disposal consideration for the reduction in the Group’s overdraft
facilities, calculating at an interest rate of 8.5%;
e. The EPS increase of 2,2 cents or 4.38% is due to the after tax profit on disposal
exceeding the after tax profit from the Automotive Division referred to in point c
above. The HEPS reduction of 1.4 cents per share or 76.79%, off a low base in
2013, is due to the exclusion of the Automotive Division’s contribution at an after
tax profit level. This is offset to some extent by the interest cost saving referred to
in point d above;
f. The profit arising from the Disposal is calculated taking pre-tax transaction costs
of R350 000 into account; and
g. All adjustments, with the exception of costs directly attributable to the Disposal,
the Disposal consideration and the profit arising from the Disposal are expected
to have a continuing effect on the financial results of Jasco.
(3) For the purposes of calculating NAVPS, NTAVPS, the Before and After pro forma figures are
based on the actual number of shares in issue of 218,399,311. Furthermore, the following key
assumptions have been made in the calculation of the pro forma figures:
a. The Disposal consideration was utilised to settle employee related liabilities of
R1 681 000 and decrease the Group’s overdraft facilities by R10 947 000;
b. Share capital and reserves include the net after tax profit realised on the
Disposal of R5 781 000;
c. A current tax liability of R 1 247 000 was recognised, relating to the capital gains
tax payable on the profit arising from the Disposal;
d. Inventory decreased by R2 319 000;
e. Trade and other receivables were reduced by R3 817 000;
f. Property, plant and equipment was decreased by R311 000; and
g. Trade and other payables were decreased by R847 000.
6. Categorisation
6.1. The Disposal is categorised as a category 2 transaction for purposes of the JSE listings
requirements and therefore does not require shareholder approval.
By order of the Board
Midrand
21 January 2014
Sponsor to Jasco
Grindrod Bank Limited
Date: 21/01/2014 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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