Jasco: Security turns around

Encouragingly, the one straggler in the group, the security division, has shown a significant turnaround at the hands of its CEO Mel Davies.

From a operating profits of just R0.1m last year, and having recorded R1.3m in the first half of the financial year under review, the division made R8.3m in operating profits on R94.3m in turnover, an 8.8% margin. The division now contributes 18% of revenue and 13% of operating profits.

It should also continue to benefit from the need to improve the country's overall security, particularly in the run-up to the 2010 Fifa World Cup, Jasco said.

It has already won material contracts from Transtel, the Bisho Correctional Centre for minors and Johannesburg Metropolitan Council that would be executed over the next year to 18 months and were worth more than R100m.

The telecommunications division contributed 54% of revenue in the year under review - this has declined as a percentage contributor in line with the group's strategy - and 63% of operating profits.

Although margins declined, as a result mostly of the lower spend by fixed-line operators, these were still a "healthy" 14.8%, Jasco said. It anticipates the operators and service providers will continue to spend on their access networks.

Manufacturing grows

The second biggest division, the domestic products manufacturing division, grew revenues by 22%, contributing 27% of the group's total income.

Operating profit accounted for 24% of the total. Jasco said it expected the division to remain flat this year, because although it constantly introduced new products to counter the potentially negative economic factors it is exposed to, it was affected by continued commodity price increases, higher interest rates and electricity supply concerns.

Total group revenue was R519.2m, a 28.4% increase on the previous year. Jasco said 16% of this was organic, and 12% from three new businesses, T-Components, RapidCloud and Tasslelane Services.

It generated 28% more cash from operations before working capital than last year: R55.4m.

BEE

Jasco recently announced a significant transaction that sees the group's empowerment shareholding bolstered and adds significant clout to the business.

This involved black-controlled investment holding company AfroCentric taking a 34.9% stake in Jasco, and Jasco simultaneously buying a 34% stake in one of the country's significant electrical and telecoms cable manufacturers (and a leader in fibre optic cables specifically), M-Tec, which turned over R1bn last year.

The number of shares to be issued to existing empowerment partners, Community Investment Holdings (CIH), was dependant on a five-year profit history, which closed at the end of this financial year. This will see about 57% of the preference shares, or 17.2m ordinary shares, issued to CIH.

Jasco expects it will grow earnings next year, despite the dilution brought about by the issue of new shares.

Going forward, CIH's will hold a 24% direct stake in Jasco, but also an indirect stake, through a 34.7% share in Afrocentric that it took as part of the deal.

The group's total empowerment shareholding after the conversion and the transactions will be more than 50%.

The general meeting of shareholders in relation to the deal is scheduled to take place on 26 May.

- Fin24.com