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Audited results for the year ended 30 June 2019 and subsequent events
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 2019 AND SUBSEQUENT EVENTS
Highlights
Revenue
R1.14 billion
Gross margin
Increased
34.4%
EBITDA (from operations)
Increased
R118.9 million
(excluding head office costs)
Earnings
Decreased
(R29.1) million
Cash generated from operations
Increased
R79.5 million
INTRODUCTION
Jasco Electronics Holdings Limited publishes its audited year-end results to 30 June 2019.
For the full announcement, refer to the company's website, www.jasco.co.za.
ACHIEVEMENTS
- Group gross margin up to 34.4% from 31.4%;
- EBITDA from operations up by 4% to R118.9 million;
- Cash generation from operations increased to R79.5 million (2018: R55.2 million);
- Improved performance from DataVoice on new projects in the Middle East;
- The reduction in the net forex loss of R1.4 million compared to a R4.0 million loss in the prior year;
- The expected disposal of Electrical Manufacturers for its net asset value;
- The customer satisfaction score (NPS) up to 44 from 33; and
- Employer of choice certification achieved.
DISAPPOINTMENTS
- The disposal of East Africa and closure of Middle East and related loan impairments;
- The impairment of goodwill in Power & Renewables on continued operating losses;
- The ongoing losses in Security - now restructured in the Security & Fire business;
- The derecognition of deferred taxation assets; and
- The deterioration in the debt to equity ratio and the breach of loan covenants.
FINANCIAL SUMMARY
- Revenue was flat at R1.14 billion (2018: R1.15 billion). Revenue from RAMM Technologies (RAMM) of R42.0 million
was included for the full 12 months compared to revenue of R13.3 million for four months in F2018.
- Management implemented a number of corrective actions during the year, which impacted profitability.
Operating profit before net interest was R11.3 million (2018: R40.4 million) and the net operating margin of 1.0% was down
on last year's 4.0%, mainly due to once-off head office costs and impairments of goodwill and loans to associates.
- On an operating performance basis, business unit operating profit before depreciation and amortisation increased
by 4% to R118.9 million (2018: R114.2 million).
- The group earnings loss per share (EPS) was 12.9 cents per share (2018: 3.3 cents loss per share) and the headline
earnings loss per share (HEPS) was 10.7 cents per share (2018: 1.5 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
R75.8 million compared to R94.4 million in F2018.
KEY INTERNAL INITIATIVES
Reducing debt levels and the interest charge
The priority is to further reduce the corporate bond obligation over the next financial year from the expected cash
generation due to higher profitability levels from the business units. The board has reviewed the target gearing ratios and
maintained the maximum level of long-term debt target at 50% of equity. The gearing percentage is 81.4% (2018: 56.5%) due
to the R20 million increase in the working capital loan and the reduction in equity following the impairments and once-off costs.
This is well above the maximum internal threshold of 50% and is receiving urgent attention. The gearing percentage includes the
Bank of China working capital term loan facility, which replaced the previous overdraft facilities. This has historically been
excluded from the calculation of the long-term debt target.
Improving profitability of business units
The Power & Renewables Energy businesses were combined in the year and the losses were reduced. However, the targeted break-even
was not achieved and management has re-visited the business model. The Security & Fire businesses were combined with effect from
1 July 2019 following an extensive restructure. The Middle East operations were closed, with R2.4 million in loan impairments.
The East Africa operations are currently in the process of being disposed of and the R4.4 million loan at 30 June 2019 was fully impaired.
Working capital management
Management will continue to focus on working capital, with inventory levels being a priority. The high standards in debtors'
management will be maintained.
GROUP PROSPECTS
The economic outlook for F2020 remains very challenging. However, the management team will remain focused on executing on its strategic goals.
The key focus areas for the next 12 months are:
- Stabilise the balance sheet by disposing of 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 into key growth markets and launch new smart solutions offerings of open access networks,
digital billboards, solar Power Purchase Agreements or Lease to Own and cloud workforce management;
- Continue to focus on effective people engagement, development and retention; and
- Reduce and optimise the legal and operational structure.
SUBSEQUENT EVENTS
- The board received a binding offer for Jasco Electrical Manufacturers, which was accepted in August 2019 and approved by the board in
September 2019. The agreements were signed and the detailed terms announcement was released on 4 October 2019 on SENS. This is subject
to all the required shareholder and regulatory approvals. The process is only expected to conclude by April 2020. Accordingly,
there is no impact on the current financial year. The anticipated proceeds will be utilised to reduce debt (the corporate bond and
working capital loan).
- The corporate bond was extended to 31 January 2021 and the corporate bondholder condoned the breach of the interest cover covenant for the
12-month period ended 30 June 2019 on 30 August 2019.
- The working capital loan was extended to 28 February 2021 and the lender also condoned the breach of the debtor's cover covenant
for the 12-month period ended 30 June 2019, subsequent to year-end, on 23 September 2019. A notarial general covering bond of
R100 million over the moveable assets of key wholly owned subsidiaries will be provided as additional security to the Bank of China Limited.
CHANGES TO THE BOARD
The board welcomed Mr DH (Danie) du Plessis as the new chairman of the audit and risk committee. He joined the board on 20 December 2018 and
has already made a valuable contribution. With effect from 1 July 2019, Mr AMF (Pete) da Silva became an alternate non-executive director to
Mr MJ (Joe) Madungandaba.
DIVIDEND
A dividend is not proposed due to the group's current financial position.
DIRECTORS' STATEMENT
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/2019/jse/isse/JSC/JSC2019.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 INTEGRATED REPORT AND NOTICE OF ANNUAL GENERAL MEETING
Shareholders are further advised that the company's Integrated Annual Report for the year ended 30 June 2019, containing the unmodified
annual financial statements and notice of annual general meeting, will be distributed on Friday,18 October 2019.
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, 26 November 2019, at 14:00 to transact the business as stated
in the notice of the Annual General Meeting to be distributed to shareholders on 18 October 2019.
The record date, for purposes of determining which shareholders are entitled to receive the notice of Annual General Meeting, will be
Friday, 4 October 2019.
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 Tuesday,
12 November 2019 and Friday, 15 November 2019 respectively.
The Integrated Annual Report will be available on the company website: www.jasco.co.za from 11 October 2019.
For and on behalf of the board
Dr ATM Mokgokong M Janse van Vuuren WA Prinsloo
(Non-executive chairman) (Chief executive officer) (Chief financial officer)
11 October 2019
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*, AMF da Silva
(Non-executive), M Janse van Vuuren (CEO), WA Prinsloo (CFO), T Petje (Executive), M Ndema (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: 11/10/2019 02:30:00
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