There is great potential for Jasco to expand its offerings in Africa in the telecommunications sector, says the listed electronics company.
CEO Martin Lotz says Africa is a fast-growing market and the mobile market is expected to grow over the next three to five years, despite the economic downturn. The company, which has 1 000 staff and a market capitalisation of about R200 million, provides equipment such as towers to mobile operators.
In the past year, the recession has taken its toll on the company, which reported results for the 16 months to June yesterday. “We don't know really when this market is going to recover, and we've prepared ourselves for that,” says Lotz.
Revenue for the period was R773 million, compared to R519 million in the 12 months to February. Jasco recently changed its year-end from February to June. Its trading margin came down to 8.7%, from 9.6%, due to the difficult trading environment, and profit was R37.5 million, compared to 33.5 million in February.
Low penetration
Jasco hopes to benefit from the expansion of GSM networks in Africa, as well as increased penetration of broadband technologies, he says. Telecommunications is the company's largest division, providing 54% of revenue and 63% of profit.
In SA, the company is bullish on broadband penetration - currently at 2.8% ‑ growing as more cables such as Seacom become available. “This leaves a very large, untapped market,” says Lotz.
While Telkom, accounting for about 15% of group revenue, has slowed spend, Lotz expects it to have to maintain its network soon, which will aid Jasco's revenue growth.
Hopes for improvement
The company's security division is expecting to experience weaker market conditions, with many major projects put on hold. However, Lotz expects smaller projects to continue and the company has changed its model to increase rental contracts and outsourcing during the tough times.
The security division accounts for 28% of profit and revenue, and is its second-largest division.
Lotz says the domestic division is expecting to start improving as the strike at Defy has come to an end. As a result, the appliance manufacturer is placing orders, he says. Consumer spend is expected to start picking up towards the end of the year, which will bolster sales of appliances.
Jasco's domestic division accounts for 18% of revenue and 15% of profit.
The electrical division, which comprises M-TEC, is set to benefit from spending by Eskom and Telkom, says Lotz. The division should also grow through exports, he adds.
M-TEC was acquired in mid-2008. Jasco has partnered with Taihan Electronic Wire Company, one of the top 10 cable manufacturers in the world, to add technical expertise to M-TEC.
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