Wrap Text
Unaudited interim results for the six months ended 31 December 2015
JASCO ELECTRONICS HOLDINGS LIMITED
Registration number 1987/003293/06
JSE share code: JSC
ISIN: ZAE000003794
("Jasco" or "the company" or "the group")
REVENUE
up
11%
to R558,1m
OPERATING
PROFIT
up
290%
to R30,1m
HEPS
up
783%
to 5,7 cents
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2015
INTRODUCTION
OPERATIONAL PERFORMANCE
The operational performance of the group improved significantly
from the comparative period, against difficult market conditions, with
all businesses contributing to profits. This pleasing performance was
largely driven by a strong order book and prudent cost management.
The Carrier and Intelligent Technologies businesses – representing 58%
of the group's revenue – delivered gratifying results and management's
focus on the Enterprise business resulted in its return to profitability.
SALE OF INVESTMENT IN M-TEC
The investment in M-TEC remains classified as "held-for-sale" and
carried at R58,0 million. The 51% investment in M-TEC was therefore
not equity accounted.
The final suspensive condition of formal approval from the Competition
Commission, is expected during the next few months.
FINANCIAL OVERVIEW
STATEMENT OF COMPREHENSIVE INCOME
Headline earnings and headline earnings per share increased by
828% to R12,9 million (Dec 2014: R1,4 million) and 783% to
5,74 cents per share (Dec 2014: 0,65 cents per share) respectively.
Earnings per share (EPS) was similarly up by 810% to 5,73 cents
per share (Dec 2014: 0,63 cents per share). The weighted average
number of shares in issue increased from 213,3 million shares to
224,2 million shares following the general issue of 10,9 million
shares in April 2015 to the investor in the group's corporate bond.
This increase in the number of shares had a 5% dilutionary impact on
EPS and HEPS.
Group revenue of R558,1 million increased by 11.1% from
R502,3 million in the comparative period. Both the Carrier and
Intelligent Technologies businesses grew revenue strongly. Electrical
Manufacturers' revenue was flat compared to December 2014, due to
lower than expected demand from its major customers. The Enterprise
business was 11% down on last year due to the delay of two major
projects into the second half of the financial year.
Group profit before interest and taxation (PBIT) increased by
290% to R30,1 million from R7,7 million in December 2014, with all
the businesses contributing to profits.
The net finance cost paid of R7,8 million was largely unchanged
from last year's R7,6 million. The finance income earned from long-
term receivables decreased slightly from R2,9 million to R2,2 million
in December 2015 and relates mainly to the group's long-term
co-location contract with an African telecommunications operator.
The main contributor to finance costs was the corporate bond interest
of R5,7 million, which was higher on the inclusion of the bond issue
costs in the effective interest rate (Dec 2014: preference shares –
R3,3 million). Pleasingly, the interest on the group's bank overdraft
reduced from R3,6 million to R2,4 million.
The taxation charge of R8,0 million (Dec 2014: R0,6 million credit)
was due to a number of the subsidiary companies returning to tax
paying positions on full utilisation of historic assessed losses in the
prior financial year. The effective tax rate is at 35% due to an increase
in permanent differences related to the corporate bond interest which
is non-deductible.
Profit attributable to ordinary shareholders therefore increased by
856% to R12,9 million (Dec 2014: R1,3 million) due to the same
reasons as the EPS and HEPS increases.
STATEMENT OF FINANCIAL POSITION
NON-CURRENT ASSETS AND LIABILITIES
Plant and equipment of R55,9 million reduced slightly (Dec 2014:
R57,3 million), as the asset base depreciated. Capital expenditure
at R3,8 million remained curtailed in the period (Dec 2014:
R3,2 million), and predominantly consisted of additions to the plant
and machinery at Electrical Manufacturers and essential equipment for
the group's IT infrastructure.
Intangibles (including goodwill) of R80,1 million decreased from
R108,9 million in December 2014 as a result of the impairments
taken at the last financial year-end on goodwill and capitalised
research and development (R&D).
The net deferred tax asset of R28,2 million (Dec 2014: R26,9 million
and Jun 2015: R33,0 million) relates mainly to the recognition of the
previously unutilised assessed losses in Jasco's operating subsidiaries.
The conservative approach adopted in the recognition thereof remains
consistent.
Other non-current financial assets of R21,0 million (Dec 2014:
R33,7 million) mainly relates to the non-current portion of the group's
finance lease receivable from its annuity contract with an African
telecommunications operator.
The long-term interest-bearing liabilities of R121,3 million (Dec 2014:
R62,4 million) increased due to the issue of the R100 million corporate
bond in January 2015. The balance mainly relates to project funding
from a strategic supplier to fund the finance lease receivable for an
African telecommunications operator.
CURRENT ASSETS AND LIABILITIES
Inventories on hand were R120,7 million (Dec 2014: R102,2 million).
The inventory levels in the Carrier business remained high due to
the expected higher revenue. Intelligent Technologies' inventory also
increased due to planned higher volumes, with inventory levels in
Enterprise and Electrical Manufacturers steady.
Trade and other receivables were R352,1 million (Dec 2014:
R274,9 million).
The net trade receivables of R199,8 million increased from
R198,5 million in December 2014 but decreased from
R289,8 million in June 2015. The age profile of the accounts
receivable book was healthy on the higher sales volumes, and
continues to receive management's attention to ensure optimal cash
collections. Refer to the table of net working capital days below.
The provision for doubtful debts of R2,0 million (Dec 2014:
R1,6 million) is considered adequate to cover specific risk trade
receivables identified and any impairment required in terms of IAS 39.
The bad debt to revenue percentage remains at less than 1% in line
with historic levels.
Other receivables and pre-payments increased to R153,1 million
(Dec 2014: R78,0 million) on trade funding provided for a Compact
Fluorescent Lamp (CFL) project in line with the energy management
focus in Intelligent Technologies. This profitable project is expected
to be completed by the end of February 2016. Also included in the
balance are the prepaid service level agreements (SLA) to suppliers
(mainly in Enterprise).
Current interest-bearing liabilities of R26,6 million (Dec 2014:
R106,2 million) decreased on the repayment of the AfroCentric
preference shares in January 2015.
Current non-interest bearing liabilities of R262,8 million (Dec 2014:
R226,6 million) increased due to the trade funding secured for the CFL
project mentioned above. Trade accounts payable of R139,7 million
decreased from R147,2 million in December 2014. The deferred
maintenance revenue of R65,3 million (Dec 2014: R47,0 million)
increased on prepaid SLAs from blue-chip customers, predominantly
in Enterprise. The foreign currency risk is carefully managed through a
hedging programme that utilises a blend of the available instruments.
Net working capital days of 38 days were above the target of
35 days, predominantly due to the higher asset values in Carrier at
the end of the period. The following table compares to the June 2015
and December 2014 positions:
Dec 15 Jun 15 Dec 14
Inventory 34.5 31.8 38.8
Receivables 97.1 104.6 95.0
Payables (93.6) (97.6) (95.1)
NWC days 38.0 38.8 38.7
The net bank overdraft of R25,4 million increased from R3,2 million
in December 2014, but decreased by R5,7 million from the
R31,1 million reported at the June 2015 financial year-end. This is
within Jasco's facility limits. Refer to the statement of cash flows for
further information.
STATEMENT OF CASH FLOWS
The statement of cash flows reflects an improvement of 106.3% in
cash generated from operations before working capital flows of R39,1
million compared to R18,9 million in December 2014. Working
capital flows reflect an outflow of R15,0 million (December 2014:
R3,4 million inflow). This outflow related to the increase in accounts
receivable and inventory levels in the Carrier and Intelligent
Technologies businesses on the higher first half volumes.
The net interest payment of R7,8 million (including the corporate bond)
was largely unchanged from R7,6 million, while income tax payments
increased from R3,8 million to R4,7 million on improved profitability at
subsidiary level.
Total cash inflows from operating activities of R11,6 million was
therefore higher compared to the R10,9 million recorded in
December 2014.
Investing activities saw a net cash outflow of R0,2 million (Dec
2014: R0,5 million inflow) on capital expenditure and capitalised
R&D. This was partly offset by the receipt of proceeds on the finance
lease. The financing activities outflow of R5,6 million (Dec 2014:
R6,5 million) mainly relate to the repayment of the vendor loan (for
the finance lease receivable) and other asset financing loans.
Accordingly, the difference between the closing and opening
cash balances was an increase in cash resources of R5,7 million
(December 2014: R5,0 million). Management continues its focus on
reducing inventory levels (particularly in Carrier), improving terms of
supply from major trade partners, and collecting accounts receivable
within agreed terms.
OPERATIONAL REVIEW
CARRIER – 40% OF GROUP REVENUE
Revenue increased by 26.0% to R226,7 million (Dec 2014:
R179,9 million), mainly due to an increase in spend by the major
telecommunications operators on growing demand for data services.
This resulted in operating profit increasing by 66.6% to R31,5
million (Dec 2014: R18,9 million) at an operating margin of 13.9%
(December 2014: 10.5%).
ENTERPRISE – 27% OF GROUP REVENUE
Revenue for the year decreased by 11.3% to R151,4 million
(December 2014: R170,8 million) due to the delay of two major
projects into the second half of the financial year. The annuity
revenue base was maintained at 25%. The operating profit was a
profit of R1,7 million from a loss of R1,6 million at December 2014.
The operating margin improved from a negative 0.9% to a positive
1.1% due to significant savings in the cost base, offsetting the impact
of the lower sales volumes.
INTELLIGENT TECHNOLOGIES – 18% OF GROUP REVENUE
Revenue increased by 38.5% to R102,3 million (Dec 2014:
R73,9 million), due to the good growth in the Power Solutions and
Broadcast Solutions businesses. The operating profit of R9,5 million
(Dec 2014: R3,3 million) was significantly up in line with the volume
increase and good cost control. The operating margin of 9.3%
improved from 4.5% last year.
ELECTRICAL MANUFACTURERS – 15% OF GROUP REVENUE
Electrical Manufacturers experienced flat revenue at R82,0 million
(Dec 2014: R81,8 million) on a slowdown in spend from large
appliance manufacturers. The last six months saw a continued focus
on diversifying the revenue base, with the largest customer now below
70% of the business unit's revenue (Dec 2014: 72%). The operating
profit of R6,3 million increased from R5,6 million on improved
gross margins and tight cost control. The operating margin therefore
increased from 6.8% to 7.7%.
KEY INTERNAL INITIATIVES
The following key internal initiatives are underway:
REDUCING DEBT LEVELS AND THE INTEREST BURDEN
Management's priority is to reduce debt on receipt of the proceeds
from the M-TEC sale. This, together with the improved cash generation
expected from the operations going forward, will allow the group to
substantially reduce its gearing profile. The gearing ratio improved
from 73.3% at June 2015 to 64.8% at December 2015. After the
disposal of M-TEC and receipt of the sale proceeds, the gearing
percentage is expected to fall to below 50%. During the period, the
interest cover ratio improved from 1.0 times to 3.9 times.
IMPROVING THE PROFITABILITY OF THE ENTERPRISE BUSINESS
The focus on reducing costs and improving efficiencies was evident in
the last six months. The new ERP system in Enterprise was implemented
successfully and the business is benefiting from the re-engineered
business processes and control environment. The management structure
of the business was also strengthened, with key appointments made.
Management will focus on the execution of large projects to achieve
the required revenue.
WORKING CAPITAL MANAGEMENT
During the first six months, the main drive was on volume and
profitability in the Carrier business, which necessitated a greater
investment in working capital. This investment in working capital
will translate into cash inflows in the second half. A close watch will
remains on the inventory and accounts receivable levels in the group.
GROUP PROSPECTS
The South African economic and market conditions have deteriorated
dramatically in recent months. The dramatic volatility of the rate of
exchange has made trading more difficult, with the full impact not
experienced yet. The recent interest rate hikes by the South African
Reserve Bank will see a further tightening of growth in 2016.
Against this market context, Jasco will continue to execute against its
strategy and focus on a number of key areas:
-Continue the expansion in Africa by leveraging off the recently
established base in Kenya
-Continue to drive regional growth in Western Cape, KwaZulu-
Natal and the Eastern Cape
-Add new products and services to Jasco's portfolio, with an
emphasis on Managed Solutions
-Drive energy optimisation products and services to large corporate
and public (SOE) entities
-Continue the transformation of Jasco, with employment equity and
skills development a key priority to, and improve the group's B-BBEE
rating and ongoing competitiveness
Following the anticipated conclusion of the M-TEC disposal, Jasco's
primary focus will be on delivering sustained profits, enabled by the
more efficient group structure established over the last few years.
Shareholders are advised that any forward looking information or
statements contained in this announcement have not been reviewed
or reported on by Jasco's independent auditors.
SUBSEQUENT EVENTS
There were no material subsequent events.
BASIS OF PREPARATION OF INTERIM RESULTS
The unaudited results comply with IAS 34 – Interim Financial
Reporting. The accounting policies and methods of computation used
in the preparation of this report are consistent with those used in the
preparation of the annual financial statements for the year ended
30 June 2015, which comply with International Financial Reporting
Standard (IFRS), the SAICA Financial Reporting Guides, as issued by
the Accounting Practices Committee and Financial Pronouncements
as issued by the Financial Reporting Standards Council, the Listings
Requirements of the JSE Limited and the Companies Act (2008) of
South Africa.
CHANGES TO THE BOARD
There were no changes to the Board since the last reporting date.
For and on behalf of the board
Dr ATM Mokgokong
(Non-executive chairman)
AMF da Silva
(Chief executive officer)
WA Prinsloo
(Chief financial officer)
10 February 2016
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of financial instruments are determined using
appropriate valuation techniques, including recent market transaction
and other valuation models, have been applied and significant inputs
include exchange rates. The group only has assets that are carried
at fair value in level 2. There is no difference between the fair value
and carrying value of financial instruments not presented below due
to either the short-term nature of these items, or the fact that they are
priced at variable interest rates.
FAIR VALUE HIERARCHY
Financial instruments carried at fair value in the statement of financial
position (R'000):
– Financial assets at fair value through profit or loss –
– Financial liabilities at fair value through profit or loss 8 058
Directors and Secretary: Dr ATM Mokgokong (Chairman),
MJ Madungandaba (Deputy Chairman), JC Farrant*, Sir JA Sherry*,
H Moolla*, S Bawa (Non-executives), AMF da Silva (CEO),
WA Prinsloo (CFO) (Executives), D du Plessis (Company Secretary)
*Independent
SUMMARISED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Dec 2015 Dec 2014 % June 2015
(R'000) 6 months 6 months change 12 months
Revenue 558 062 502 325 11,1 1 123 818
Turnover 555 742 499 398 11,3 1 117 431
Interest received 2 320 2 927 (20,7) 6 387
Operating profit/(loss)
before interest and taxation 30 065 7 705 290,2 (72 456)
Interest received 2 320 2 927 (20,7) 6 387
Interest paid (10 111) (10 544) (4,1) (22 433)
Equity accounted income/(loss)
from associate – 1 243 (100,0) (689)
Profit/(loss) before taxation 22 274 1 331 1 573,5 (89 191)
Taxation (7 969) 623 (1 379,1) 6 343
Profit/(loss) for the period/
year 14 305 1 954 632,1 (82 848)
Other comprehensive income – – (1 190)
Total comprehensive income/
(loss) for the period/year 14 305 1 954 632,1 (84 038)
Tax rate 35,8% (46,8%) 7,1%
Profit attributable to:
– minority shareholders 1 451 610 137,9 424
– equityholders of the parent 12 854 1 344 856,4 (83 272)
Profit/(loss) for the period/
year 14 305 1 954 632,1 (82 848)
Total comprehensive income/
(loss) attributable to:
– minority shareholders 1 451 610 137,9 424
– equityholders of the parent 12 854 1 344 856,4 (84 462)
Profit/(loss) for the period/
year 14 305 1 954 632,1 (84 038)
Reconciliation of headline
earnings
Net earnings attributable to
equityholders of the parent 12 854 1 344 856,4 83 272)
Headline earnings
adjustments 19 43 55,8 88 409
–profit on disposal of
subsidiary/business unit – – (777)
–loss on remeasurement of
associate held for sale –
M-TEC – – 57 421
–impairment of intangible
assets – – 29 560
–net after-tax loss on disposal
of fixed assets 19 43 2 205
Headline earnings 12 873 1 387 828,1 5 137
Number of shares
in issue (000) 229 319 218 399 5,0 229 319
Treasury shares (000) 5 129 5 129 5 129
Weighted average
number of shares on
which earnings per
share is calculated (000) 224 190 213 270 5,1 215 155
Dilutive shares
–Shares to be
issued to settle
Telesto purchase
price (total) (000) – 2 985
Weighted average
number of shares
on which diluted
earnings per share is
calculated (000) 224 190 216 255 3,7 215 155
Ratio analysis
Attributable earnings 12 854 1 344 856,4 (83 272)
EBITDA 38 330 18 934 102,4 37 994
Earnings per share (cents) 5,7 0,6 809,8 (38,7)
Diluted earnings per
share (cents) 5,7 0,6 822,5 (38,7)
Headline earnings
per share (cents) 5,7 0,7 782,9 2,4
Diluted headline
earnings per share (cents) 5,7 0,6 795,3 2,4
Net asset value per
share (cents) 98,7 135,0 (26,9) 92,7
Net tangible asset
value per share (cents) 63,0 83,9 (24,9) 57,0
Debt:equity (%) 4,8% 58,2% 73,3%
Interest cover (times) 3,9 1,0 285,9 1,0
EBITDA interest
cover (times) 4,9 2,5 96,8 2,4
SUMMARISED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
(R'000) Dec 2015 Dec 2014 June 2015
ASSETS
Non-current assets 189 870 344 205 203 254
Plant and equipment 55 874 57 319 59 419
Intangible assets 80 051 108 944 79 891
Investment in associate – 117 353 –
Deferred tax asset 32 961 26 888 37 483
Other non-current assets 20 984 33 701 26 461
Non-current asset held for sale 58 000 – 58 000
Current assets 490 610 391 060 488 169
Inventories 120 736 102 217 99 301
Trade and other receivables 352 051 274 904 370 712
Short-term portion of other non-current
assets 14 110 12 401 13 276
Taxation paid in advance 3 713 1 538 4 037
Cash and cash equivalents – – 843
Total assets 738 480 735 265 749 423
EQUITY AND LIABILITIES
Share capital and reserves 228 143 289 639 213 103
Non-current liabilities 129 621 62 777 134 712
Interest-bearing liabilities 121 294 62 429 126 901
Deferred maintenance revenue 3 551 348 3 355
Deferred tax liability 4 776 – 4 456
Current liabilities 380 716 382 849 401 608
Interest-bearing liabilities 26 591 106 190 29 235
Bank overdraft 25 420 3 156 31 983
Non-interest-bearing liabilities 262 762 226 553 296 804
Deferred maintenance revenue 65 324 46 950 41 093
Taxation liability 619 – 2 493
Total equity and liabilities 738 480 735 265 749 423
SUMMARISED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Dec 2015 Dec 2014 June 2015
(R'000) 6 months 6 months 12 months
Attributable to equity holders of the
parent
Opening balance 207 768 286 581 286 581
Treasury shares – Share Incentive Trust – (7) –
Issue of new shares, net of cost – – 5 948
Share-based payment reserve 735 – 806
Transactions with non-controlling
shareholder – – (1 105)
Total comprehensive income 12 854 1 344 (84 462)
– Profit for the period/year 12 854 1 344 (83 272)
– Other comprehensive income – – (1 190)
Dividends declared – – –
Closing balance 221 357 287 918 207 768
Non-controlling interest
Opening balance 5 335 1 111 1 111
Transactions with non-controlling
shareholders – – 3 963
Total comprehensive income 1 451 610 424
– Profit for the period/year 1 451 610 424
– Other comprehensive income – – –
Dividends paid to non-controlling
shareholders – – ( 163)
Closing balance 6 786 1 721 5 335
Total equity 228 143 289 639 213 103
SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
Dec 2015 Dec 2014 June 2015
(R'000) 6 months 6 months 12 months
Cash generated from operations before
working capital changes 39 065 18 934 39 081
Working capital changes (15 033) 3 440 (22 460)
Cash generated from operations 24 032 22 374 16 621
Net financing costs (7 791) (7 617) (16 046)
Net taxation paid (4 677) (3 836) (4 253)
Dividends paid – – –
Cash flow from operating activities 11 564 10 921 (3 678)
Cash flow from investing activities (237) 498 (7 795)
Cash flow from financing activities (5 607) (6 465) (11 557)
Increase/(decrease) in cash resources 5 720 4 954 (23 030)
SUMMARISED SEGMENTAL REPORTS
INCOME AND EXPENSES
31 Dec 2015 (Unaudited) 31 Dec 2014 (Unaudited) 30 June 2015 (Audited)
Operating Operating Operating
(R'000) Revenue profit/(loss) Revenue profit/(loss) Revenue profit/(loss)
Carrier 226 668 31 453 179 931 18 876 414 319 48 293
Enterprise 151 429 1 662 170 780 (1 609) 380 385 935
Intelligent Technologies 102 305 9 494 73 881 3 334 164 631 13 302
Electrical Manufacturers 82 048 6 304 81 756 5 574 174 906 12 947
Sub-total operating divisions 562 450 48 913 506 348 26 175 1 134 241 75 477
Other 139 (17 795) – (17 202) 895 (42 716)
Adjustments (4 527) (1 053) (4 023) (1 268) (11 318) (105 217)
Total 558 062 30 065 502 325 7 705 1 123 818 (72 456)
FINANCIAL POSITION
31 Dec 2015 (Unaudited) 31 Dec 2014 (Unaudited) 30 June 2015 (Audited)
(R'000) Assets Liabilities Assets Liabilities Assets Liabilities
Carrier 204 066 89 085 168 393 82 716 195 008 100 854
Enterprise 144 994 87 039 148 493 87 035 194 373 135 929
Intelligent Technologies 159 338 114 567 96 558 68 096 105 593 67 087
Electrical Manufacturers 62 746 7 583 75 351 10 849 78 749 20 103
Sub-total operating divisions 571 144 298 274 488 795 248 696 573 723 323 973
Other 122 803 155 583 143 580 140 812 113 237 214 991
Adjustments 44 533 56 480 102 890 56 118 62 463 (2 644)
Total 738 480 510 337 735 265 445 626 749 423 536 320
Registered office: Jasco Park, c/o 2nd Street and Alexandra Avenue,
Midrand, 1685
Transfer secretaries: Link Market Services SA (Pty) Limited, 13th Floor,
Rennie House, 19 Ameshoff Street, Braamfontein, 2001
Sponsor: Grindrod Bank Limited, Fourth Floor, Grindrod Tower,
8A Protea Place, Sandton, 2146
More information is available at: www.jasco.co.za
Date: 10/02/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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