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Media release - 7 February 2013

07 February 2013
Media release
7 February 2013


JASCO HALFWAY THROUGH ITS RESTRUCTURING AND IMPLEMENTATION OF NEW STRATEGY
  • Core businesses improved performance, with revenue up 12%
  • Adverse market conditions severely impacted the performance of Lighting Structures, Telecom Structures and the group’s associate M-TEC, which reduced overall group profitability
  • Decisive action taken, with Lighting Structures sold, Telecom Structures restructured and the investment in M-TEC under review

Jasco Electronics Holdings Limited (Jasco) today announced interim results for the six month to December 2012 following completion of the first year and a half of its three-year strategy implementation.

Commenting on the results, Jasco’s CEO, Pete da Silva, said:

“The core businesses in the group continued to show the benefits of operating as an integrated group, with clear verticals focused on targeted customer seg¬ments. We have taken decisive action on the non-performers that dragged profitability down, with Lighting Structures sold, Telecom Structures restructured and our investment in M-TEC under review

“The group’s sales have improved through a focused performance and delivery culture and the start of cross-selling initiatives. Orders on hand increased by 16% to R159 million at 31 December 2012. We continued to see new orders from businesses working together during the year, as well as further growth in annuity income to around 22% of group revenue.”

Commenting on the outlook, he said:

“We will continue to drive our focused strategy through the group. We will further simplify processes, with superfluous legal entities to be closed and deregistered to clean up the group structure and to increase the planned statutory benefits. We have identified clear growth hurdles per business and will continue to divest of non-core assets.

“The restructure in Telecom Structures will ensure a gradual turnaround of this business. Although M-TEC’s operational management did improve, this investment has been placed under review, following the poor performance during the period due to delayed customer orders,

“The group is well advanced in our debt restructuring process. The second phase of our strategy roll out is underway, which will further increase customer centricity and improve business processes to ensure our core businesses are positioned to achieve the group’s medium-term to long-term growth criteria.”

FINANCIAL OVERVIEW
  • Consolidated revenue increased by 12% to R552,1 million (2011: R493,9 million)
    • Due to market share growth in most businesses
  • Operating profit decreased by 8% to R19,0 million (2011: R20,6 million). The profit was impacted by two once-off events:
    • A R8,8 million profit on the disposal of the group’s head office property
    • A R4,4 million loss on disposal of Lighting Structures
  • Earnings per share (EPS) was up 56% to 10,1 cents per share (2011: 6,4 cents per share)
  • Headline earnings (HEPS) was down 27% to R7,1 million (2011: R9,7 million)
    • The main reasons for the decline in HEPS were the two once-off items listed above, as well as the contribution from the group’s associate, M-TEC, which was down 84% to R0,8 million (2011: R4,9 million)
  • Net working capital days of 29 improved from the 35 days reported for December 2011
    • This was largely due to the improvement in stock days from 31 days to 29 days and debtors days from 80 days to 76 days. The creditor days were unchanged at 75 days. The improvement also reflects the impact of the disposal of Lighting Structures
  • The statement of cash flows reflects the utilisation of cash in working capital to fund revenue growth in the period. The net outflow from investing activities reflects the investment in primarily group IT and machinery at Electrical Manufacturers on the back of secured orders
    • As a result, Jasco’s net short term borrowings increased from R38,4 million at the start of the period to R65,1 million at the period end. The overdraft remains within the group’s facility limits
  • The disposal of the property will improve the debt:equity ratio once the proceeds are applied to the group’s liabilities. A debt restructuring programme is also currently under way to improve financing ratios
OPERATIONAL SUMMARY

To ensure a more integrated business development focus, the group was restructured last year under one Jasco brand into three verticals:
  • Information and Communications Technology (ICT) Solutions
  • Industry Solutions
  • Energy Solutions
ICT Solutions comprises the Carrier and Enterprise Solutions businesses of Jasco. Industry Solutions comprises the Security business and the low voltage Power Solutions business, with Energy Solutions comprising Electrical Manufacturers and the now disposed of Lighting Structures. To clearly indicate the impact of the associate M-TEC, it is now separately disclosed and no longer included in the ICT and Energy Solutions verticals.

ICT SOLUTIONS - 68% OF CONSOLIDATED REVENUE

ICT Carrier Solutions – 48% of consolidated revenue
  • Revenue increased by 25% to R292,4 million (2011: R234,7 million)
    • Despite tough market conditions, ICT Carrier won orders from five new blue-chip clients and saw market share increases across the board, with the exception of Telecom Structures
      • Telecom Structures experienced significant market changes which included site sharing by major mobile operators and a slowdown in infrastructure roll-out. The business model was changed to accommodate these impacts. The restructure was completed during the period
  • Consolidated operating profit of R20,9 million was flat (2011: R20,7 million), largely due to investment in the voice and data annuity connectivity business. This annuity business grew by 156% to R17,4 million per annum compared to the same period last year
  • The operating margin was down from 8,8% to 7,1%, mainly due to losses in Telecom Structures and business development costs
ICT Enterprise Solutions – 20% of consolidated revenue
  • Revenue was maintained at R96,7 million (2011: R95,9 million) against continued slow corporate spend
  • The defensive nature of the large annuity revenue base in Enterprise Solutions (50% of divisional revenue) cushioned the impact of this slowdown in spend, with operating profit relatively flat at R6,3 million (2011: R6,5 million)
    • There was a change in product mix due to normal fluctuating demand cycles. Strategic new customers were also acquired during the period at slightly reduced margins. However, the annuity service business from these customers will flow through at traditional margins
  • The operating margin was down from 6.7% to 6.5%
INDUSTRY SOLUTIONS – 14% OF CONSOLIDATED REVENUE
  • Revenue increased by 35% to R81,2 million (2011: R60,4 million)
    • Revenue was driven by the first-time inclusion of Power Solutions and the continued improvement in the Fire Solutions business where sales were up more than 200% from the comparative period
    • During the period, the benefit of increased group collaboration (cross-selling) was prominent in this vertical, with a number of contracts won with the ICT Solutions vertical
  • Operating profit decreased by 13% from R4,6 million to R4,0 million
    • This was due to the first-time allocation of overheads of R1,8 million from group level to the vertical, as well as a R1,9 million expected decrease in interest received from the Transnet Freight Rail contract
  • Operating margin decreased from 7.7% to 4.9%
ENERGY SOLUTIONS – 18% OF CONSOLIDATED REVENUE

  • Electrical Manufacturers’ revenue increased by 7% to R71,5 million (2011: R67,0 million) following increased orders from the white goods market
    • Operating profit increased by 27% to R8,6 million (2011: R6,8 million)
      • This was due to synergies and improved efficiencies after the integration of the two old factories into one new larger facility
    • The operating margin at the end of the period therefore improved to 12,0% (2011: 10,1%)
    • Lighting Structures’ revenue dropped sharply by 43% to R30,8 million (2011: R53,9 million) on a lack of orders from the largely municipal customer base
    • The business incurred an operating loss of R1,1 million versus a profit of R3,0 million in the comparative period
      • Given the concerns over the sustainability of selling to municipalities through electrical contractors, the business was sold during the period

ASSOCIATED INVESTMENT in M-TEC
  • Although the operational management of M-TEC has improved, equity accounted income from the associate reduced sharply by 84% to R0,8 million (2011: R4,9 million)
    • This was largely due to a R100 million decline in aluminium conductor volumes at M-TEC’s major customer following project delays


Issued by:
HG Strategic Communications - (011) 465 0484
Heidi Geldenhuys - 083 325 8924

Enquiries:
Jasco - 011 266 1500