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Audited results for the year ended 30 June 2020
JASCO ELECTRONICS HOLDINGS LIMITED
Registration number 1987/003293/06
JSE share code: JSC
ISIN: ZAE000003794
("Jasco" or "the company" or "the group")
SUMMARY OF AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2020 AND SUBSEQUENT EVENTS
Financial results (year?on?year changes)
- -17% Revenue R939,2 million
- -67% EBITDA from operations* R39,6 million
- -77% EBITDA R12,7 million
- -280% Earnings -R110,9 million
*before head office costs
Introduction
The group faced tough trading conditions in the first half to December 2019,
particularly in the ICT?Carriers business due to a sharp reduction
in spend by a major telecommunications operator. These challenges
continued into the start of the second half of the year before disaster
struck, with the announcement of an immediate national lockdown
in response to the COVID?19 pandemic. The resultant impact in the
fourth quarter was a devastating revenue impact of approximately
R163 million and approximately R59 million impact on operating profit.
Jasco Electronics Holdings Limited publishes its audited year?end results to
30 June 2020.
For the full announcement, refer to the company's website, www.jasco.co.za.
Achievement and disappointments
Achievements
- The reduction in the overhead costs at head office and the majority of the
businesses; and
- The expected disposal of Reflex Solutions for R76 million (cum dividend) post
year?end.
Disappointments
- The severe impact of the COVID?19 lockdown on revenue and EBITDA;
- The cancellation of the Electrical Manufacturers' disposal transaction in June 2020
due to the impact of the lockdown on the purchaser's funding;
- The reversal of the R11,5 million revenue recognised relating to a voice
recording solution implemented during the year;
- The impairment of goodwill in RAMM Technologies on reduced revenue and
profitability; and
- The deterioration in the debt to equity ratio due to significant losses.
Financial summary
? Revenue was down to R939,2 million (2019: R1,14 billion). The fourth quarter
was severely impacted by the COVID?19 lockdown, with revenue down by
R163 million.
? The operating loss before net interest was R60,3 million (2019: R11,3 million
profit) mainly due to the drop in revenue, once?off restructure costs and the
impairment of goodwill. The COVID?19 lockdown had a R59 million negative
impact during the fourth quarter.
? The group earnings loss per share (EPS) was 49,4 cents per share
(2019: 12,9 cents loss per share) and the headline earnings loss per share
(HEPS) was 44,5 cents per share (2019: 10,7 cents loss per share).
? Jasco's working capital management remained an area of focus during the
year, with a pleasing reduction in short?term receivables and payables.
? The statement of cash flows reflects an inflow in cash generated from
operations before working capital changes of R29,9 million compared to
R57,8 million in F2019.
Key internal initiatives
Reducing debt levels and the interest burden
The priority is to continue to reduce the debt obligation over the next financial
year and to introduce a new commercial banking partner to reduce the Bank
of China working capital loan. Due to the reduction in the cost base across the
group, improved profitability and cash generation are expected going forward.
This will assist in systematically reducing the debt levels.
The gearing percentage is 315% (from 81%) due to the significant loss reported.
This includes the Bank of China's working capital term loan facility which
replaced the previous overdraft facilities. Following the potential disposal of
Reflex Solutions (refer to Subsequent events), the bulk of the proceeds will be
utilised to reduce debt and return the gearing ratio closer to the target levels.
Improving profitability of business units
The desired improvement in the profitability was not achieved. Although
aggressive cost cutting was undertaken throughout the year, with a number
of business areas being rationalised or closed, the impact of the COVID?19
lockdown was severe. Consequently, a further fundamental organisational
restructure was completed in the new financial year following the appointment of
the interim CEO.
Working capital management
Management will continue its focus on working capital and maintain the high
standards achieved in debtors' and inventory management.
Group prospects
The economic outlook for F2021 remains very challenging. However,
management will remain focused on executing their strategic goals.
The key focus areas for the next 12 months are:
- Stabilise the balance sheet by disposing non?core assets and reducing debt;
- Improve earnings by addressing the head office costs and underperforming
business units to meet profitability targets;
- Accelerate growth through investment in key growth markets and launch new
smart solution offerings of open access networks, internet?of?things, and cloud
workforce management;
- Continue to focus on effective people engagement, development and
retention through further investment in the group's online training platform; and
- Reduce and optimise the legal and operational structure.
The performance thus far during the first half of the new financial year is pleasing
with improving revenue following the easing of the COVID?19 lockdown.
Although the revenue is still lower than the same period last year, the gross
margins are steady, the overhead expense base has reduced by 25% and
operating profit is consequently higher.
Subsequent events
The group entered into share subscription and put option agreements, as well as
several related agreements with the minority shareholders of Reflex Solutions on
18 September 2020. As a consequence, Jasco will relinquish control of Reflex
Solutions on the share subscription date and will accordingly equity account the
business. This transaction was approved by the board on 9 September 2020.
There is no impact on the current financial year.
The board approved the exercise of the put option by the company to dispose
of the 510 shares in Reflex Solutions for R76,0 million (including the dividend of
R3,2 million). As this is a Category 1 transaction, it will be subject to all required
shareholder and regulatory approvals. The disposal proceeds will be utilised
to reduce debt (the corporate bond and working capital loan). The circular is
expected to be distributed to shareholders by 31 January 2021.
The company obtained an extension of the working capital loan facility from the
Bank of China to 27 December 2021.
The COVID?19 lockdown levels eased to Level 1 and business volumes have
improved during the first quarter of the new financial year. Certain of the business
units have improved faster than others.
Changes to the board
The board welcomed Mr AMF (Pete) da Silva back as the interim CEO from
1 June 2020, following the resignation of Mr M (Mark) Janse van Vuuren on
31 May 2020. Mr T (Thapelo) Petje resigned from the board on 29 February
2020. The Board thanks them both for their dedicated and loyal service to
the group.
Dividend
A dividend is not proposed due to the group's current financial position.
Audit opinion
The auditors, Mazars, have audited the consolidated annual financial statements
for the year ended 30 June 2020 from which the 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,
which includes key audit matters, are available for inspection at Jasco's
registered office and on the company's website at www.jasco.co.za
Directors' statement of responsibility
This short?form announcement is the responsibility of the directors and is only a
summary of the information in the full announcement and does not contain full or
complete details. The full announcement can be found on the company's website at
www.jasco.co.za or https://senspdf.jse.co.za/documents/2020/jse/isse/JSC/JSC2020.pdf
Copies of the full announcement may also be requested at the company's registered
office and at the office of the sponsor, at no charge, during office hours. Any
investment decision should be based on the full announcement published on the
company's website.
Posting of the integrated annual report and notice of annual general meeting
Shareholders are further advised that the company's integrated annual report
for the year ended 30 June 2020, containing the annual financial statements
and notice of annual general meeting, will be distributed on Friday,
18 December 2020.
Included in the integrated annual report is a notice of annual general meeting of
shareholders, which will be held in the company's boardroom, Jasco Office Park,
Corner Alexandra Avenue and Second Street, Midrand, on Tuesday, 19 January
2021, at 14:00 to transact the business as stated in the notice of the annual
general meeting to be distributed to shareholders on 18 December 2020.
The record date, for purposes of determining which shareholders are entitled to
receive the notice of annual general meeting, will be 4 December 2020.
The last day to trade and the record date for shareholders to be eligible to
participate in and vote at the annual general meeting are 5 January 2021 and
8 January 2021 respectively.
The integrated annual report will be available on the company website:
www.jasco.co.za from 18 December 2020.
For and on behalf of the board
Dr ATM Mokgokong AMF da Silva WA Prinsloo
(Non?executive chairman) (Chief executive officer) (Chief financial officer)
15 December 2020
More information is available at: www.jasco.co.za
Directors and Secretary:
Dr ATM Mokgokong (Chairman), MJ Madungandaba (Deputy Chairman),
DH du Plessis*, S Bawa*, P Radebe*, T Zondi* (Non?executive),
AMF da Silva (CEO), WA Prinsloo (CFO) (Acting company secretary)
*Independent
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
Date: 15-12-2020 07:15:00
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