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Provisional audited summarised results and dividend declaration for the year ended 30 June 2018
JASCO ELECTRONICS HOLDINGS LIMITED
Registration number 1987/003293/06
JSE share code: JSC
ISIN: ZAE000003794
("Jasco" or "the company" or "the group")
PROVISIONAL AUDITED SUMMARISED RESULTS AND DIVIDEND DECLARATION FOR THE YEAR ENDED 30 JUNE 2018
ORDER ENTRY
R1,2bn
Exceeded for the first time
REVENUE
UP 10%
R1,15 billion
EBITDA
UP 45%
R81,9 million
OPERATING PROFIT
UP 28%
R53,7 million
EARNINGS
UP 9%
R8,8 million
GEARING
43%
less than 50% maximum level
INTRODUCTION
The tough economic conditions in South Africa continued to prevail, with the country
entering a technical recession after the second quarter of calendar 2018. This has
exacerbated the ongoing volatility of the rate of exchange on the back of emerging
market weakness. These factors presented significant challenges to the group.
The main achievements and disappointments for the year are outlined below:
Achievements include:
- The debt to equity ratio of 43% (F2017: 34%) remaining below the maximum
level of 50%;
- Good operating profit contribution from our acquisition of Reflex Solutions for
12 months, with the performance ahead of the earn-out target;
- Ongoing customer diversification in Electrical Manufacturers, with volumes from
new customers contributing to the revenue growth;
- Operating profit growth from Broadcast Solutions in Intelligent Technologies on
completion of large projects;
- Reduction in the tax rate on lower non-deductible expenses; and
- The acquisition of RAMM Technologies, with effect from 1 March 2018, and its
first-time profit contribution in line with expectation.
Disappointments include:
- Continued lack of organic growth in the South African market, with Carriers
negatively impacted in the telecommunications sector;
- Lower revenue in East Africa due to the uncertain political environment from
national elections, which resulted in low business confidence. Operations were
reduced and local Kenyan partners were introduced to grow the sales pipeline;
- Lack of progress in the Middle East, which resulted in the closure of the UAE
office in favour of only project-based work;
- The rate of exchange volatility. Although an improvement from last year's
R8,6 million loss, the group suffered forex losses of R4,0 million this year;
- Ongoing margin squeeze in Electrical Manufacturers due to pressure from its
major customer. To address this, the customer diversification programme is
progressing;
- The operating loss by Datavoice in Enterprise due to the delay of projects in the
Middle East. These have materialised post year-end; and
- The operating loss from Power & Renewables in Intelligent Technologies on
lower sales volumes. Restructuring has been completed and costs reduced.
DELIVERY ON STRATEGY
Jasco continues to progress its strategy of offering services across the information
and communication technologies (ICT), security and fire, power and renewables and
manufacturing sectors. It operates across the entire value chain, from engineering,
solutions development, procurement, installation and integration to maintenance.
The three strategic goals underpinning our strategy are:
1. Improve earnings
2. Develop employees to achieve formal employer of choice certification
3. Accelerate transformation, with a focus on broad-based black economic
empowerment (B-BBEE), digitisation of the business and the evolution of the
portfolio into a smart solutions provider of choice
It is imperative that the organisation now shifts from planning into execution mode to
deliver against these three strategic goals. This will be management's key focus over
the next 12 months.
IMPROVE EARNINGS
Improving earnings will be a key focus area going forward. The group aims to
achieve this through:
- Improving business unit operating profit;
- Particular business units that are on the watch list due to disappointing
performances are: Power & Renewables and Datavoice. In addition, although
the Electrical Manufacturers business delivered a satisfactory performance in
F2018, it has had a very tough start to the F2019 year due to ongoing market
pressure;
- Reducing costs at the head office. Key areas being targeted are the reduction
of interest, audit costs, executive management positions and property rental
expenses. Jasco also continues to reduce debt and interest costs; and
- Improving the effective tax rate by reducing non-deductible expenses.
DEVELOP EMPLOYEES
The continued weak performance of the South African economy and the ongoing
shortage of critical, skilled resources, particularly within the ICT industry, has
resulted in the business environment becoming even more challenging during the
past 12 months. To address this, key senior and technical management resources
continue to be placed on retention schemes.
The group further invested in training of its technical resources and placed particular
emphasis on black employees.
With the implementation of the group's talent management framework, the group will
focus on its skills development programme, as well as fast-tracking black employees
to reflect the national demographics of the country.
The group is currently benchmarking itself against the top "employer of choice"
programme to ensure that it attracts, acquires, develops and retains employees to
unlock this key differentiator.
TRANSFORMATION
Jasco has identified three aspects of transformation that should be addressed to
achieve transformation objectives:
- Broad-based black economic empowerment (B-BBEE)
Due to the diverse nature of the group and its operations across four sectors,
Jasco has decided to individually rate the various legal entities in their
applicable sectors instead of only at group level.
- Digitisation of the business
Digitisation of back-office support functions has become an imperative to
assist customer-facing business units to improve customer service. The team
is implementing a unified technology platform that addresses processes and
systems for both enterprise resource planning (ERP) and customer relationship
management (CRM).
- Evolution of the portfolio into a smart solutions provider of choice
Whilst the economy of South Africa still shows weakness and restricted growth,
there are key segments within the group's markets it serves that offer good
prospects for growth due to shifts in technology. Jasco is well positioned to take
advantage of these segments.
FINANCIAL OVERVIEW
STATEMENT OF COMPREHENSIVE INCOME
Revenue increased by 10% to R1,150 billion (F2017: R1,044 billion) on small
increases in all business units outside of Carriers, as well as a 12-month contribution
from Reflex Solutions of R157,0 million (F2017: R28,3 million for two months).
This business is included in Enterprise. RAMM Technologies contributed revenue of
R13,3 million for four months and is included in Intelligent Technologies. Organic
revenue growth declined by 3%, mainly due to the decline in volumes in Carriers
following lower spend from a large Tier-1 telecommunications operator.
The main contributors to revenue were:
2018 2017
R'm % change R'm
Carriers 348,7 (10%) 385,9
Enterprise 400,7 27% 315,7
Intelligent Technologies 207,2 25% 165,3
Electrical Manufacturers 203,5 7% 190,8
The operating profit before net interest was up 28% to R53,7 million from
R41,9 million in F2017, mainly due to the contributions from Reflex Solutions
and RAMM Technologies. Although the organic profit declined, significant cost
reductions partly off-set the lower volumes.
Carriers produced a 4% increase in operating profit to R53,1 million
(F2017: R51,0 million). Electrical Manufacturers' operating profit remained flat at
R13,2 million. Enterprise produced a pleasing turnaround from a loss of R3,4 million to
a profit of R14,9 million, mainly due to the 12-month contribution from Reflex Solutions
and reduced costs in Communications and Security offsetting a lower performance
from Fire Solutions. Intelligent Technologies' operating profit declined by 18% due to
losses in Power and Renewables. These losses were only partly offset by the good
performance from Broadcast Solutions and the first-time contribution from RAMM
Technologies. Consequently, the group's net operating margin of 4.7% was up on
4.0% last year.
Net interest costs of R19,8 million increased from R11,5 million, mainly due to the
increase in interest paid following the utilisation of a new general working capital
facility from the Bank of China. This replaced the bank overdraft facilities from the
local commercial banks in May 2017 at improved terms. The imputed interest of
R2,0 million on the balance of the purchase consideration for the Reflex Solutions
and RAMM Technologies acquisitions was also included in net interest costs.
The equity accounted share of losses of R4,9 million (F2017: R1,8 million) represents
Jasco's 40% share in the Middle East (R2,1 million), its 40% share in Jasco Kenya
(R2,0 million), and the 25% in Jasco Technical Services (R0,8 million for first
six months). The Middle East failed to generate any meaningful revenue due to
increasing competition in an over-traded market. To address this, the group closed
its UAE office and amended its strategy to only target opportunities in the region on
a project basis with our Middle Eastern partners taking the lead role. The revenue
in East Africa reduced significantly and resulted in higher operating losses than
planned. Accordingly, the operations were drastically scaled down and new local
partners secured as shareholders in the business during the year.
The taxation charge of R8,8 million compares to R16,3 million in F2017 on
recognition of deferred taxation on assessed losses at subsidiary level in this
financial year. The effective tax rate is above the standard rate due to non-
deductible expenses, which result in a higher taxable income. The main items
included in non-deductible expenses are the interest paid on the corporate bond,
the IFRS 2 share incentive scheme costs, and the acquisition costs.
The minorities' share of profits increased from R4,2 million to R11,3 million, mainly
due to the 12-month contribution from Reflex Solutions and the first-time contribution
from RAMM Technologies. The other minority interests are in Co-Location Solutions,
which improved its profitability, and in Fire Solutions, which returned a small loss for
the year.
Consequently, earnings increased by 9% to R8,8 million (F2017: R8,1 million) and
earnings per share (EPS) was up 8% to 3,9 cents per share (F2017: 3,6 cents per
share). Headline earnings of R6,2 million increased by 11% (F2017: R5,6 million)
and headline earnings per share (HEPS) was up 10% to 2,7 cents per share
(F2017: 2,5 cents per share). The weighted average number of shares in issue
increased from 226,9 million to 229,1 million shares.
STATEMENT OF FINANCIAL POSITION
Intangibles and goodwill
Intangibles, excluding goodwill, increased to R67,9 million (F2017: R44,6 million)
due to the RAMM Technologies acquisition, and includes the following:
- The voice transaction management application and the computer
software applications (internet-of-things or IoT platform) of R30,3 million
(F2017: R26,1 million);
- Trade names of R7,5 million (F2017: R3,9 million); and
- Customer-related intangibles of R30,0 million (F2017: R14,6 million).
Goodwill increased from R96,3 million in F2017 to R120,7 million, mainly due
to the acquisition of RAMM Technologies. There were no impairments to the
carrying value of goodwill during the year. This assessment is conducted annually
in accordance with Jasco's accounting policy to test the carrying value of goodwill
each year.
Fixed assets
Fixed assets of R79,5 million (F2017: R78,9 million) increased on capital expenditure
of R17,2 million (F2017: R25,4 million). This capital expenditure relates mainly to
R10,9 million in the Enterprise business, predominantly on technology improvements
(R9,1 million) in Reflex Solutions and on plant and machinery (R3,1 million) in the
Electrical Manufacturers business. The balance of the expenditure is spread over the
asset categories across the remaining businesses.
Long-term liabilities
The corporate bond was partly redeemed in the prior financial year to R44,6 million
and interest was serviced during the current financial year. The corporate bond
attracts interest at the equivalent of the prime lending rate and is repayable in
January 2020. The financial covenants were met during the year.
A medium-term working capital facility of R150 million was negotiated with the Bank
of China in February 2017. This replaced the general banking facilities with the
group's commercial bankers at better terms. The security provided is similar. The first
draw-down of R105 million was made in May 2017 and utilised to settle the
bank overdrafts which had historically funded the group's working capital position.
A further drawdown of R20 million was made in December 2017, increasing the
liability to R125 million at the financial year-end. The financial covenants were met
during the year. The term of the facility was extended for a further 24 months to
February 2020.
Working capital
Although Jasco's working capital management remained an area of focus during the
year, the last two months of the year produced record volumes and resulted in an
increase of R9,5 million against a reduction of R7,1 million in the prior financial year.
Inventories of R102,6 million includes R4,6 million for Reflex Solutions and R1,5 million
for RAMM Technologies, and compares to R86,3 million in F2017. Excluding these
acquisitions, the remaining increase was mainly due to higher stock of R10,7 million
in the Electrical Manufacturers business in response to demand from existing and new
customers.
Trade and other receivables of R293,8 million includes R8,1 million for RAMM
Technologies, and compares to R274,7 million in F2017. Excluding the new
acquisitions, the increase was mainly due to a R25,0 million
increase in Broadcast Solutions on the completion of significant studio upgrades for
major sports broadcasters.
Trade and other payables of R275,4 million includes R0,8 million for RAMM
Technologies, compared to R217,5 million in F2017. The trade and other payables
in Broadcast Solutions increased as the studio upgrades mentioned above were
mostly supplier funded.
The deferred purchase consideration of R40,4 million is classified as a current
liability and includes R9,8 million for Reflex Solutions and R30,6 million for RAMM
Technologies. The profit targets were met by Reflex Solutions and the R9,8 million
will be paid once the audited June 2018 annual financial statements are signed off
by the subsidiary directors. The first tranche of R15,3 million of the purchase price
of R30,6 million was paid to the RAMM Technologies vendors on 31 August 2018.
The second tranche is expected to be paid within seven days of receipt of the
reviewed May 2018 annual financial statements.
Deferred maintenance revenue decreased from R55,3 million to R38,2 million and
relates mainly to service level agreement (SLA) renewals from Enterprise customers.
The following table compares the June 2018 net working capital to the June 2017
and 2016 positions:
June 2018 June 2017 June 2016
Inventory 30.5 33.6 35.3
Receivables 91.6 91.5 107.3
Payables (95.8) (98.6) (103.8)
NWC days 26.2 29.3 38.7
Net working capital (NWC) days of 26,2 days (F2017: 29,3 days) are below the
group's target of 35 days, mainly as a result of the higher sales volumes due to the
inclusion of Reflex Solutions for a full 12 months. This excludes the impact of the
RAMM Technologies acquisition.
It is evident from this table that the working capital profile improved this year. It
must be noted that the SLA income received in advance from customers and the
SLA pre-payments made to suppliers inflate the days calculated for payables and
receivables respectively.
STATEMENT OF CASH FLOWS
The statement of cash flows reflects an inflow in cash generated from operations
before working capital changes of R82,8 million compared to R58,8 million in
F2017, mainly due to the contributions from the new acquisitions and the higher
level of depreciation and amortisation in the current financial year. Working capital
changes reflect an outflow of R9,5 million (F2017: R7,1 million inflow) on an increase
in inventories, receivables and payables related to the higher fourth quarter volumes.
The net interest payment amounted to R19,8 million (F2017: R11,5 million), while
income tax payments of R18,7 million were higher than R16,9 million in the prior
year. An ordinary dividend of 1 cent per share amounting to R2,3 million related
to F2017 was paid in the first half and is included in the total dividends paid of
R7,2 million (F2017: R5,3 million). Total cash flows from operating activities was a
R27,5 million inflow compared to the R32,1 million inflow in F2017.
Investing activities saw a cash outflow of R59,5 million (F2017: R14,5 million
inflow), which mainly related to capital expenditure on fixed assets and intangible
assets and the Reflex Solutions acquisition. Financing activities saw an inflow of
R3,8 million (F2017: R41,9 million inflow) being the R20,0 million second draw-
down of the Bank of China working capital loan, partly offset by the repayment of
vendor funded loans.
Accordingly, Jasco's net cash in the bank position of R67,9 million decreased from
R95,6 million in F2017, mainly due to the working capital demands.
ANTICIPATED MAJOR ACCOUNTING DEVELOPMENTS
The new standards, IFRS 15 (Revenue from Contracts with Customers) and IFRS 9
(Financial Instruments), did not have a material impact on F2018. The assessment of
the impact of IFRS 15 and 9 on F2019 indicates that the impact will not be material.
LITIGATION, CLAIMS AND OTHER CONTINGENCIES
The insurance claim raised against the F2017 fraud losses in the Enterprise business
was settled in full. The South African Police Service continues with their investigation
into the matter. There are no other material matters to report.
OPERATIONAL OVERVIEW
CARRIERS - 30% of group revenue
Carriers delivers telecommunications products and services, from design and
planning of networks to configuration, integration and support. As a systems
integrator and distributor, its proven solutions focus on access, transmission and
operational support systems for telecommunications networks across the African
continent.
Year under review
Revenue declined by 10% to R348,7 million from R385,8 million due to lower
orders. As anticipated, Carrier Solutions experienced a continued shift in customer
capex spend from older technology to newer, integrated network technology.
In addition, one client's spend declined due to delays in their long-distance build
programme.
Orders at Webb Industries remained relatively flat. Lower orders in the projects
division, which delivers in-building solutions for mobile operators, was offset by
good growth in the kitting division, which supplies passive ancillary equipment,
such as brackets and cables, for the operators in their site build programmes.
Although revenue declined in Carriers, gross margin levels improved due to a
higher-margin product mix and improved productivity in the services business.
As this business unit focused on overhead costs and efficiencies, operating profit
was up by 4% from R51,0 million to R53,1 million, with particularly pleasing
results from Webb Industries. The operating margin remained healthy at 15.1%
(F2017: 13.2%). Carriers remains Jasco's largest profit contributor.
Outlook
Tough trading conditions will continue in South Africa, with ongoing pressure on
pricing and capex spend in traditional areas. Further consolidation is likely in the
operator space and customers are also increasingly dealing with original equipment
manufacturers (OEMs) directly and not through systems integrators.
To counter this, Carrier Solutions will focus on selling its niche products to
Tier-2 operators in South Africa and East Africa. The group will also continue
implementing its diversification strategy of providing service capability to the top
four telecommunication original equipment manufacturers.
Jasco also has a significant passive ancillary product portfolio which positions it well
for the growing fibre to the home and business (FTTX) and 5G markets. The business
plans to increase market share through targeting the open access fibre service
providers with this product and services portfolio.
In East Africa, business conditions are expected to improve as the political
environment continues to stabilise and growth in GDP in the territory reaches
traditional highs of 6% to 7%. To tap into this, Jasco will expand its Carriers product
and service portfolio to complement the existing Enterprise portfolio.
This business unit will also remain focused on cost containment to protect operating
profit.
ENTERPRISE - 34% of group revenue
Enterprise delivers end-to-end solutions, including contact centres, unified
communications, workforce optimisation, IT infrastructure and security and fire
solutions to corporates in Southern and East Africa.
Year under review
Revenue increased by 27% to R400,7 million from R315,7 million due to the first full
year of contribution from our IT services business, Reflex Solutions, compared to two
months last year.
During the year, overhead expenses declined by 3%. This was achieved through
a focus on cost containment and reduction programmes and was particularly pleasing
considering average employee increases of 6% and continued investment into East
Africa's support functions.
Due to the strong performance from Reflex Solutions and the start of the benefits
of corrective actions in Enterprise over the last two years, operating profit turned
around from a loss of R3,4 million to a profit of R14,9 million. Whilst the operating
margin percentage is still not achieving the group's profit target levels, it was
pleasing that an operating margin of 3.7% was achieved compared to an operating
loss of 1.1% last year.
The strong performance in once-off projects in the FTTX market in Reflex Solutions was
offset by a reduction in new orders in Enterprise, especially in Fire and Datavoice and
slower expansion into East Africa following political instability and uncertainty. The
under-recovery of fixed software development costs due to lower sales in Datavoice
and the project delays and increased cost to complete projects in Fire had a negative
impact on performance.
To address the disappointing results in Datavoice and Fire, management was
replaced and the Security and Fire divisions were separated from Enterprise
and combined under one new management team to improve market focus and
service delivery to customers. These actions have already started to show some
improvement, with the businesses ending the year with strong order books.
Outlook
South African conditions are expected to remain challenging, which will delay
customer spend.
To address this, Jasco has implemented additional marketing initiatives to address
new market segments. It has also packaged specialist integration solutions, which
will allow more attractive price points to the market and will continue to improve
cross-business sales.
The Enterprise Communications business is expanding its cloud-focused solutions,
combined with a strong focus on customer service in a market of digital migration.
The team is further diversifying the portfolio to improve service and position the
business to take advantage of growth areas that digitisation will bring.
The new management and restructuring of Security and Fire will drive an improved
performance, as well as increased opportunities for cross-selling across the joint
customer base.
Although challenging market conditions will prevail during 2019, a further
improvement is expected from the Enterprise business unit due to ongoing cost
containment and an improved focus on market penetration.
INTELLIGENT TECHNOLOGIES - 18% of group revenue
Intelligent Technologies comprises broadcast solutions, smart buildings, data centres,
power solutions and renewable energy solutions. It also includes the recently-
acquired RAMM Technologies which provides real-time asset monitoring and
measuring solutions.
Year under review
The poor market conditions in South Africa had a particularly negative effect on
the Power assurance market, which saw a 70% decline in new orders.
Even against this, due to several long-term projects that create annuity revenue
and the inclusion of R13,3 million of RAMM Technologies for four months, revenue
increased by 25% from R165,3 million to R207,2 million.
Although revenue growth was strong, the losses incurred in the Power business due
to its lack of sales resulted in operating profit declining by 17% from R22,1 million to
R18,2 million. Operating margin was down to 8.8% from 13.4%.
The Broadcast Solutions business continued to deliver a strong set of results due to
a broader portfolio offering and increased spend on studio upgrades for the 2018
FIFA Soccer World Cup.
The Property Technology Management business delivered good growth due more
properties under management, which has increased the long-term revenue base.
Outlook
Although the growth in international entertainment providers over the internet has
increased competition, the South African broadcast market remains relatively strong.
Jasco's partnerships with global technology providers have positioned it well to offer
end-to-end broadcast solutions.
In the Power sector, the lack of government initiatives to stimulate the renewable
energy sector will continue to put pressure on the market. However, as reliable
power supplies are crucial to corporate entities and government, the group's solar
PV energy solutions are well placed. This has already led to the restructure of
the Power business and its incorporation into the Renewable business to unlock
additional cost savings and management synergies across these two areas, as well
as returning it back to profitability.
Jasco has recently signed a number of professional service agreements with
landlords with significant property portfolios, as well as reviewing alternative
business models to leverage the portfolio. Intelligent Technologies now has more
than 800 buildings under its management in South Africa.
The business will expand its involvement in the Internet of Things (IoT) market through
RAMM Technologies, as well as additional partnerships with local and global IoT
players. This is a highly innovative space that shows good growth potential.
In the key market of East Africa, power quality and assurance solutions will continue
to present growth opportunities, with the team focusing on expanding the offering in
this market to include the in-house power assurance and renewable portfolio.
ELECTRICAL MANUFACTURERS - 18% of group revenue
Electrical Manufacturers is largely a component manufacturer of plastic injection-
moulded products, wire harnesses, metal pressings and household electrical
products with a special focus on the large home appliance market in South Africa.
Year under review
Despite a tough year, with the South African economy showing almost no growth,
revenue increased by 7% from R190,8 million to R203,5 million. The majority
of the increase was due to higher volumes from our major appliance customers,
specifically from the refrigeration plants. For the first time in the business unit's history,
it exceeded the R200 million revenue level.
While business volumes increased, gross margins continued to come under pressure
from this business unit's largest customer in the appliance white goods market.
The more profitable product lines in the wiring harness space were also lost to
competitors due to unsustainably low pricing levels. This had a further negative
impact on the gross margin product mix.
To address this, Electrical Manufacturers continued to focus on its customer diversification
strategy, which resulted in increased sales from new customers.
Aggressive cost containment continued during the year and overhead costs
remained flat on last year even though employee costs increased by on average 6%
for the year.
All these factors resulted in maintaining the operating profit at R13,2 million, with a
decline in operating margin from 7.0% to 6.5%.
Outlook
The relatively benign South African consumer market will pose growth-related
challenges in the short term. The key focus in the coming year will be on further
diversifying the customer base and product range through a focus on small- to
medium-sized companies that will provide additional volume at improved product
margins and allow this business unit to leverage its well-established infrastructure.
The team is evaluating further diversification into other markets, such as the motor
industry accessory and plastic fibre ducting sectors.
In the coming year, further efficiency improvements in the factory production will
be introduced, with higher levels of mechanisation through robotics for automatic
product extraction processes and reduced electricity consumption through more
energy-efficient replacement machinery.
The team is investigating restructuring the business into more focused areas, such
as plastics and metal pressings, to reduce input costs from a cost of sales and
overhead perspective to improve profitability levels.
In addition, working capital levels will be reduced by increasing local raw materials
content where possible and deferring all non-essential operating expenditure through
a continued cost containment programme.
This business also plans to target increased longer-term supply contracts with higher
volumes and an improved product mix.
GROUP PROSPECTS
To counter South Africa's low growth environment, Jasco will continue to execute its
strategy and focus on the following additional key areas:
- Reduce financial gearing over the next financial year through continued cash
generation from operations;
- Continue with targeted opportunities in Africa by leveraging off the established
base in Kenya and the new local partnership;
- Ensure a return to acceptable and sustainable profitability levels in the Power
and Renewables and Datavoice businesses;
- Drive regional growth in the Western Cape, KwaZulu-Natal and the
Eastern Cape;
- Add to Jasco's products and services portfolio, with an emphasis on services in
the form of managed solutions;
- Target large corporate and public (SOE) entities with the full portfolio; and
- Continue the transformation of Jasco, with employment equity and skills
development a priority.
Following Jasco's delivery of profitable results, enabled by the more efficient group
structure, the group's focus will be on executing on its strategy and improving
earnings in the short-term.
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 are no material subsequent events to report, apart from the dividend declared.
CHANGES TO THE BOARD
There were a number of changes to the board during the year under review.
Mr AMF da Silva retired as the CEO on 30 June 2018 and was appointed as
a non-executive director on 1 July 2018. Mr MJ van Vuuren joined the board
on 1 July 2018 as the chief executive officer. The board expresses its gratitude
to Mr da Silva for the hard work in turning the group around and welcomes
Mr van Vuuren in his new role. Mr JC Farrant, the lead independent non-executive
director, will retire from the board on 31 October 2018 after 21 years of service.
The board thanks him for his dedicated service to the company.
DIVIDEND
Jasco's board is pleased to declare a dividend of 1 cent per share.
Declaration and finalisation announcement date Thursday, 27 September 2018
Last day to trade cum entitlement Tuesday, 16 October 2018
Shares trade ex-entitlement Wednesday, 17 October 2018
Record date Friday, 19 October 2018
Payment date Monday, 22 October 2018
Shares may not be dematerialised or rematerialised between Wednesday,
17 October 2018 and Friday, 19 October 2018.
In compliance with the JSE Listings Requirements, the following additional information
is disclosed:
1. the dividend has been declared out of income reserves;
2. the local Dividend Withholding Tax rate is 20%;
3. the gross local dividend amount is 1 cent per share for shareholders exempt from
paying Dividend Withholding Tax;
4. the net local dividend amount is 0,80 cents per share for shareholders liable to
pay Dividend Withholding Tax;
5. the issued share capital of Jasco is 229 319 191 ordinary shares; and
6. Jasco's income tax reference number is 9300/183/71/3.
For and on behalf of the board
Dr ATM Mokgokong MJ van Vuuren WA Prinsloo
(Non-executive chairman) (Chief executive officer) (Chief financial officer)
27 September 2018
BASIS OF PREPARATION
The summarised consolidated results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), IAS 34 Interim Financial
Reporting Standards, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council, the South African Companies
Act, 71 of 2008, as amended and the Listings Requirements of the JSE Limited.
The accounting policies and methods of computation used in the preparation of this
report are consistent with those of the previous year. These summarised consolidated
financial statements, which were derived from the underlying audited consolidated
financial statements for the year ended 30 June 2018, have not been audited.
The directors take full responsibility for the preparation of the abridged report and
the financial information has been correctly extracted from the underlying audited
financial statements. The auditors, PWC Inc., have audited the consolidated annual
financial statements for the year ended 30 June 2018 from which this summarised
report has been derived and on which an unmodified opinion was expressed.
The annual financial statements and a copy of the unmodified audit opinion are
available at Jasco's registered office.
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 2 929
- Financial liabilities at fair value through profit or loss 83
SUMMARISED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Audited Audited
30 June 30 June
(R'000) 2018 2017 % change
Revenue 1 150 400 1 044 301 10,2
Turnover 1 146 116 1 037 315 10,5
Cost of sales (784 064) (721 651) 8,6
Gross profit 362 052 315 664
Other income 29 579 27 894
Selling and distribution costs (1 814) (3 145)
Administrative expenses (244 311) (209 491)
Other expenses (91 783) (88 981)
Operating profit 53 723 41 941 28,1
Finance income 4 284 6 986 (38,7)
Finance costs (24 112) (18 521) (30,2)
Equity accounted share of loss from joint venture/associate (4 923) (1 823) (170,0)
Profit before taxation 28 972 28 583 1,4
Taxation (8 822) (16 253) 45,7
Profit for the year 20 150 12 330 63,4
Other comprehensive income (351) 319
Total comprehensive income for the year 19 799 12 649 56,5
Profit attributable to:
- non-controlling interests 11 303 4 202 169,0
- ordinary shareholders of the parent 8 847 8 128 8,9
Profit for the year 20 150 12 330 63,4
Total comprehensive income attributable to:
- non-controlling interests 11 303 4 202 169,0
- ordinary shareholders of the parent 8 496 8 447 0,6
Total comprehensive income for the year 19 799 12 649 56,5
Reconciliation of headline earnings
Net earnings attributable to equity holders of the parent 8 847 8 128 8,9
Headline earnings adjustments (2 665) (2 562) 4,0
- profit on disposal of business unit (Technical Services) (832) (2 641)
- profit on disposal of subsidiary (East Africa) (1 768) -
- net (profit)/loss on disposal of fixed assets (65) 79
Headline earnings 6 182 5 566 11,1
Number of shares in issue ('000) 229 319 229 319
Treasury shares ('000) 250 2 407
Weighted average number of shares on which earnings
per share is calculated ('000) 229 069 226 912
Dilutive share options ('000) 373 2 451
Weighted average number of shares on which diluted
earnings per share is calculated ('000) 229 442 229 363
Ratio analysis
Attributable earnings 8 847 8 128 9
EBITDA 81 930 56 315 45
Earnings per share (cents) 3,9 3,6 8
Diluted earnings per share (cents) 3,9 3,5 11
Headline earnings per share (cents) 2,7 2,5 8
Diluted headline earnings per share (cents) 2,7 2,4 13
Net asset value per share (cents) 105,4 102,2 3
Net tangible asset value per share (cents) 23,1 40,1 (42)
Debt: Equity (%) 43 34 14
Interest cover (times) 2,3 3,3 (30)
EBITDA interest cover (times) 4,1 4,9 (16)
SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
Audited Audited
30 June 30 June
(R'000) 2018 2017
Cash generated from operations before working capital changes 82 775 58 790
Working capital changes (9 542) 7 060
Cash generated from operations 73 233 65 850
Net financing costs paid (19 828) (11 535)
Net taxation paid (18 717) (16 943)
Dividends paid (7 230) (5 304)
Cash flow from operating activities 27 458 32 068
Cash flow from investing activities (59 537) 14 544
Cash flow from financing activities 3 790 41 878
Increase/(decrease) in cash resources (28 289) 88 490
SUMMARISED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Audited Audited
30 June 30 June
(R'000) 2018 2017
ASSETS
Non-current assets 317 522 251 663
Plant and equipment 79 515 78 936
Intangible assets 188 599 140 910
Investment in joint venture/associate 6 919 284
Deferred income tax 32 942 27 526
Other non-current assets 9 547 4 007
Current assets 478 029 479 598
Inventories 102 642 86 334
Trade and other receivables 293 772 274 747
Foreign currency contracts 2 929 604
Taxation refundable 9 506 7 280
Short-term portion of other non-current assets 1 295 15 082
Cash and cash equivalents 67 885 95 551
Total assets 795 551 731 261
EQUITY AND LIABILITIES
Shareholders' equity 267 851 249 401
Share capital 281 283 281 283
Treasury shares (282) (2 635)
Non-distributable reserves 6 941 6 427
Retained loss (46 504) (53 119)
Equity attributable to equity holders of the parent 241 438 231 956
Non-controlling interests 26 413 17 445
Non-current liabilities 184 237 168 504
Interest-bearing liabilities 173 365 162 598
Deferred maintenance revenue 518 331
Deferred income tax 10 354 5 575
Current liabilities 343 463 313 356
Trade and other payables 275 436 217 519
Provisions 17 337 19 581
Foreign currency contracts 83 476
Taxation 2 575 2 626
Deferred maintenance revenue 38 237 55 333
Short term borrowings 9 795 17 821
Total equity and liabilities 795 551 731 261
SUMMARISED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Audited Audited
30 June 30 June
(R'000) 2018 2017
Attributable to equity holders of the parent
Opening balance 231 956 224 749
Treasury shares - Share Incentive Trust 2 353 3 597
Share-based payment reserve 865 (359)
Total comprehensive income 8 496 8 447
- Profit for the year 8 847 8 128
- Other comprehensive income (351) 319
Dividends paid (2 232) (4 478)
Closing balance 241 438 231 956
Non-controlling interest
Opening balance 17 445 7 100
Acquisition of subsidiary 6 663 6 966
Transactions with non-controlling shareholders - 3
Total comprehensive income 11 303 4 202
- Profit for the year 11 303 4 202
- Other comprehensive income - -
Dividends paid to non-controlling shareholders (8 998) (826)
Closing balance 26 413 17 445
Total equity 267 851 249 401
SUMMARISED SEGMENTAL REPORTS
Income and expenses 30 June 2018 30 June 2017
Operating Operating
(R'000) Revenue profit/(loss) Revenue profit/(loss)
Carriers 348 738 53 092 385 846 51 032
Enterprise 400 742 14 923 315 652 (3 446)
Intelligent Technologies 207 168 18 231 165 294 22 094
Electrical Manufacturers 203 530 13 158 190 795 13 275
Sub-total operating divisions 1 160 178 99 404 1 057 587 82 955
Other 3 883 (43 000) 4 770 (36 887)
Adjustments (13 661) (2 681) (18 056) (4 127)
Total 1 150 400 53 723 1 044 301 41 941
Financial position
(R'000) Assets Liabilities Assets Liabilities
Carriers 153 596 49 511 150 705 38 191
Enterprise 163 097 100 273 152 772 88 623
Intelligent Technologies 88 780 51 634 75 254 32 824
Electrical Manufacturers 95 608 22 877 89 445 19 776
Sub-total operating divisions 501 081 224 295 468 176 179 414
Other 177 552 318 460 170 685 302 827
Adjustments 116 918 (15 035) 92 400 (381)
Total 795 551 527 700 731 261 481 860
Directors and Secretary: Dr ATM Mokgokong (Chairman), MJ Madungandaba (Deputy Chairman), JC Farrant*, S Bawa*,
P Radebe*, T Zondi* AMF da Silva (Non-executives), MJ van Vuuren (CEO), WA Prinsloo (CFO), TS Petje, SM Samuels (Executives),
N Modisakeng (Company Secretary) *Independent
Registered office: Jasco Park, c/o 2nd Street and Alexandra Avenue, Midrand, 1685
Transfer secretaries: Link Market Services SA Proprietary 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: 27/09/2018 09:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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