Johannesburg - A diversified portfolio helped small-cap technology firm Jasco Electronics Holdings to avoid the full severity of the economic downturn.
Although profit for the year to end-June 2009 rose to R37m from R33m in the comparable period, Jasco felt the results could have been better, particularly over the seasonally slow quarter from March to May.
"The trading environment deteriorated dramatically from March 2009 onwards," Jasco said in its results statement. Although always seasonal, the results for the four months to June 2009 were disappointing, the company said.
Jasco operates in the telecommunications, security, domestic products and electrical products industries. The domestic appliances division experienced a severe decline in demand due to cheap imports and a two-month period of industrial action at key customers.
Domestic products revenue was down nearly 18% to R105m from R127m in 2008.
Jasco's largest revenue source - the telecommunications division - had an equally tough year. Its operating profit declined 8% to R43m from R47m and the economic crisis squeezed margins from 16% down to 14%.
The security division performed particularly well, with operating profit up 57% to R21m from R13m. However, this was the result of large projects secured in the 2008 financial year and executed in the period under review.
The security division started feeling the effects of the global recession during the last four months of the 2009 financial year when a number of projects were postponed, negatively affecting the forward order book.
BEE transaction
The electrical division comprises Jasco's 51% investment in M-TEC, which it acquired in 2008. The transaction was largely funded by the issuing of R100m in redeemable preference shares to black economic empowerment (BEE) group AfroCentric Investment Corporation, making Jasco a black-owned entity.
Jasco's earnings per share and headline earnings per share dropped to 36.2c and 37.2c respectively from 49c, mainly as a result of the BEE transaction.
M-TEC was awarded a substantial portion of Eskom's contract to expand its national grid, which led to the business expanding its capacity. However, the contract was delayed by 18 months.
In addition, M-TEC experienced a drop in demand for aluminium conductors, fibre-optic cables and copper telecommunications products. The company also had to write down stock because of the drop in commodity prices.
However, the last four months saw an improvement in trading conditions for M-TEC, resulting in a doubling of Jasco's share of the M-TEC profit after tax to R1.7m from R0.7m.
"The group's prospects, as with those of many other companies, will be significantly influenced by macro-economic conditions and the manner in which the local economy copes in a very fluid global context," Jasco said in its results statement on Wednesday.
The company said it would sharpen its focus on servicing and influencing the full breadth of the communications supply industry in the financial year ahead.
"At a divisional level, telecommunications is well placed to remain stable, security will face tougher markets, domestic products will likely recover off a low base and M-TEC has been effectively right-sized to improve its contribution," said Jasco CEO Martin Lotz.
- Fin24.com