Wrap Text
Trading Statement
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”)
TRADING STATEMENT
Introduction
Jasco advises shareholders that revenue for the year to 30 June
2015 will be between 5% and 10% higher. All businesses outside
of Electrical Manufacturers – which was affected by the Metals
and Engineering Industries sector strike - improved their
performance.
Although the full benefit of the group’s three-year restructure
was evident in the second half of the year, with pure operating
performance – measured by the group in core operating profit –
improving between 6% to 11%, earnings per share was unfortunately
negatively impacted by the following once-off impairments:
- a R57,4 million impairment of M-TEC on exit from this
investment;
- a R19,4 million impairment of goodwill in the Enterprise
and Carrier businesses due to a reduction in anticipated
cash flows from historic acquisitions all operating
profitably);
- a R10,1 million impairment of research and development
intangibles in the Enterprise business due to this
business’ current voice recording technology reaching its
end of life by 2017 and the anticipated reduction of future
cash flows. To address this, the group has already commenced
the development of alternative cloud-based technology
solutions;
- a provision of R14,3 million raised for the cancellation of
a historic long term rental contract, previously disclosed
to the market; and
- a provision of R3,8 million raised for bad debt from one
debtor.
Earnings per share (“EPS”) will therefore be a loss of between
38.4 cents and 39.0 cents per share (between 1339% and 1359%
lower) compared to the positive 3.1 cents per share (re-presented
due to M-TEC, refer below) for the previous corresponding period.
Headline earnings per share (“HEPS”), which excludes these
impairments, will be between 315% and 335% higher (between 2.33
cents and 2.45 cents per share) compared to the 0.56 cents per
share (re-presented) for the previous corresponding period.
The weighted average number of shares in issue for the period
increased from 172 931 580 to 215 154 670. An additional 72
million shares were issued in the rights issue of 21 January
2014 and 10,9 million shares were issued in the general issue of
28 April 2015. This had a dilutionary impact on the EPS and HEPS
in the current financial year.
Corporate Bond Issue and Redemption of Preference Shares
Shareholders are referred to the SENS announcements made on 29
January 2015 relating to Jasco’s first issue of R100 million in
terms of its listed R750 million Domestic Medium Term Note
Programme. The capital raised was used to fully redeem the R90
million preference shares, issued to AfroCentric Investment
Corporation Limited, on 30 January 2015.
M-TEC
The group has a 51% shareholding in its associate, M-TEC, with
Taihan Electric Wire Co. Limited (“Taihan”) of Korea holding the
remaining 49% interest. As reported previously, the investment
was classified as “held-for-sale” on 1 February 2013 for IFRS
reporting purposes. Accordingly, Jasco stopped equity accounting
for this investment in its consolidated results for the June
2013 and June 2014 financial years. However, Jasco was not able
to conclude the disposal of the asset within the required
timeframe. In terms of IFRS 5, this required a re-presentation
of the audited results previously reported on, with the full
impact included in the December 2014 interim results
announcement.
Notwithstanding the above, negotiations to exit the investment
continued during the second half of the 2015 financial year, and
Jasco entered into a binding Heads of Agreement for the sale of
its 51% stake in M-TEC. Shareholders are referred to the SENS
announcement dated 17 July 2015 in which the terms of the
proposed transaction were disclosed. In line with IFRS 5, the
investment in M-TEC is therefore once again “held-for-sale”, and
equity accounting was accordingly suspended for the last five
months of this year.
As the selling price of R60 million is lower than the carrying
value of R115,4 million (after costs to sell the investment), an
impairment of R57,4 million has to be put through. Although
management regrets a further impairment in M-TEC and
acknowledges the shareholder value destruction, the group
believes exiting this business has become crucial. The team will
be in a much stronger position to improve Jasco’s results without
constant management attention to address legacy issues.
Conclusion
Although the current period was impacted by the various once-
off items described above, the group believes the platform has
been set to continue improving its operating performance as the
full impact of the restructure benefits continue to flow through.
The information in this trading statement has not been reviewed
or reported on by the company’s external auditors.
Shareholders are further advised that Jasco’s audited annual
results for the year months ended 30 June 2015 will be announced
on 17 September 2015.
Midrand
25 August 2015
Sponsor
Grindrod Bank Limited
Date: 25/08/2015 10:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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