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Jasco interim HEPS soar

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 10 Feb 2016
Jasco CEO Pete da Silva says the dramatic volatility of the rand has made trading more difficult.
Jasco CEO Pete da Silva says the dramatic volatility of the rand has made trading more difficult.

Jasco's interim results have shown a huge improvement on a year ago, with headline earnings rising 828% to R12.9 million, compared to R1.4 million 12 months ago.

Headline earnings per share (HEPS) grew 783% to 5.74c per share for the half-year ended 31 December, while group revenue was up by 11% at R558 million.

Jasco CEO Pete da Silva says the company is pleased with the improvement in results, especially against the backdrop of tough market conditions.

"The majority of our businesses delivered strong results, with all businesses now profitable, including the previously under-performing Enterprise," he says.

The previously struggling Enterprise segment ? which makes up 27% of group revenue ? is now profitable "after strong action taken". Operating profit for Enterprise came in at a positive R1.7 million from a loss of R1.6 million a year ago.

Da Silva says the company will now focus on the execution of large projects to achieve the required revenue, which was still 11% down on last year for Enterprise, due to the delay of two major projects into the second half of the financial year.

"We have focused on driving sales, with our order book up 24% from December 2014 and a focus on cost-cutting resulting in 6% cost savings," adds Da Silva.

Jasco says all of its business units now comply with the minimum revenue threshold of R150 million per annum in line with its strategy.

Both the Carrier and Intelligent Technologies businesses - together representing 58% of the group's revenue - grew strongly. Carrier's revenue increased by 26% for the period while Intelligent Technologies' revenue grew 38.5%.

"We remain focused on improving working capital. 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 will translate into cash inflows in the second half. A close watch will remain on the inventory and accounts receivable levels in the group," says Da Silva.

Electrical Manufacturers' revenue was flat compared to December 2014 "due to lower than expected demand from its major customers".

"We continue to focus on a number of key initiatives to ensure continued improvement. Although the gearing ratio improved from 73.3% at June 2015 to 64.8% at December 2015, we want to see a further improvement, which is expected after receipt of the M-TEC sale proceeds," says Da Silva.

Group profit before interest and taxation soared to R30.1 million from R7.7 .million in December 2014, with all the businesses now contributing to profits.

Dramatic volatility

Da Silva admits 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."

He says as a result, the company will focus on continuing to grow its regional and African footprint and adding new products and services to its portfolio.

"Following the anticipated conclusion of the M-TEC disposal, our primary focus will be on delivering sustained profits, enabled by the more efficient group structure established over the last few years."

The group sold its 51% shareholding in its associate, M-TEC, to Community Investment Holdings subsidiary MH1 for an aggregate purchase price of R60 million last year. M-TEC had been a continuous drag on Jasco's past results and hindered the completion of its "strategy to become a smart technology and solutions partner to various industries".

Jasco says the investment in M-TEC remains classified as "held-for-sale", with the 51% investment therefore not equity accounted. The final suspensive condition of formal approval from the Competition Commission on the sale is expected during the next few months.

Jasco's market capitalisation is now R158.2 million, and in the past year, the share price has risen by around 6%. On the back of the strong results released this morning, the company's share price had risen over 4% in early trade, with the stock price sitting at around 69c per share.

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