Technology group IST`s operating profit increased 54% to R26.1 million in the year to February, despite a turnover increase of only 7.5% to R300.32 million.
CEO Harry Coetzee says the small increase in turnover is indicative of tough trading conditions, particularly in the telecommunications market.
He says the strong recovery of the rand in the latter half of the year resulted in a net loss of R2.7 million on exchange rates against a profit of R5.8 million the previous year.
Nonetheless, the group has a strong balance sheet and cash reserves increased from R53.9 million to R79.7 million.
Coetzee says the mechanical group produced a particularly strong performance during the year, with IST Dynamics, IST Industrial and IST Nuclear all exceeding their targets by substantial margins.
"In the electronics group, IST Energy and the BEE (black economic empowerment) joint venture, Tswelopele Engineering, both did very well.
"IST Telecom and IST Data were affected by the softness of the telecoms market generally and specifically by Telkom SA`s continued spending curb." However, he says they were able to generate "creditable" profits through cost control and diversification.
"IST Otokon was dealt a temporary setback by the delayed implementation of Eskom`s Demand Side Management initiative, on which this business had largely focused its efforts during the period.
Coetzee says all the businesses are in good shape and have significant prospects on the horizon.
"The strengthening of the rand against the dollar should not affect the group`s export prospects but will limit the exchange rate gains it enjoyed from its dollar-denominated sales in recent years."
He says the war in Iraq could have an as yet unpredictable knock-on effect on IST`s Middle Eastern activities and markets.
"Although the year ahead is likely to be another challenging one, with unsettled conditions continuing in some of our markets, the group remains confident about the future.
"Our budget for the new year forecasts further growth with an earnings increase target of a similar order to that which was achieved over the past year."
The IST share was trading 10c or 9.5% up at 115c on the JSE late this morning.
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