Jasco sees telecoms driving growth

By Nicola Mawson for Jasco

Johannesburg, 06 Oct 2006

An upswing in telecommunications spending bodes well for near-term growth, says Jasco.

CEO Martin Lotz says broadband will be the biggest driver in the telecommunications industry going forward, and he expects fixed-line operators to play a large role in this area.

Its telecoms division is still its largest contributor to revenue, having contributed 55.8% to revenue from operating divisions. Revenue in the division increased by 17.1% to R98.7 million and saw its operating margin increase from 12.8% to 13.7%.

Lotz points out that Telkom had rolled out 143 000 ADSL lines by the end of March, according to its own information. But there are 4.7 million fixed lines in SA.

"Every fixed line could be an ADSL line," he says, referring to an anticipated upswing in demand. While demand may be low to start off with, he expects this will pick up as benefits become realisable.

In addition, both Neotel and Telkom have announced capital expansion plans. Telkom is to spend R30 billion and Neotel R11 billion in the next few years.

Well placed

Jasco believes it is well placed to benefit from this as it supplies this industry with consumables, as well as high-end products such as testing and billing tools.

"If Telkom touches a line to ADSL-enable it, somewhere it touches something it bought from Jasco."

In addition, Lotz sees increased activity in terms of rolling out GSM on the continent, such as in countries like Ghana, Rwanda, Zambia and Tanzania.

Its security division, currently a black sheep, could also potentially benefit from changing trends going forward.

Lotz says security will become more of an imperative as SA readies itself for 2010. A move towards wireless security is already been seen and the division needs to position itself to benefit from this, he says.

Underperformance

However, it was not the star performer in the company`s half-year results, released yesterday. Security is the firm`s smallest division and reported general "underperformance", which prevented it from achieving its business plan.

Its contribution to divisional revenue decreased from 16.2% to 14.4% and it contributed R25.4 million to overall revenue, slightly up from last year. However, a "lack of meaningful project business impacted on operating profits, which were down from R1.7 million last year to R1 million this year," the company says.

"Although we are disappointed with the performance from security, we have already put actions in place to address the situation," Lotz says in a statement.

He adds there is work to do to benefit from government`s plans to place CCTV cameras in cities and on roads, but the division has already seen a management change. "I`ve got some homework to do before I can say there are opportunities there [to benefit from]."

In the next few years, Lotz sees each division - security, manufacturing and telecoms - playing a role in the company`s bottom line. He points out that it is a matter of balancing the diversity within the division so that each is at a strong point to benefit from changing market conditions.