JSE-listed Jasco Electronics on Monday posted weaker first-half financial results as the company faces tough market conditions.
For the six months ended December 31, Jasco reported an 81% decline in headline earnings per share (HEPS) to 1.2c and a fall of 68% in earnings per share (EPS) to 2c.
The drop in HEPS is attributed to higher interest paid, equity accounted losses from the international start-ups, ineffective tax rate owing to the nondeductibility of corporate bond interest and an increase in minorities’ share of profits during the period under review, while the EPS decline is, in part, owing to the increase in the weighted average number of shares in issue from 224.6-million shares to 226.9-million shares.
However, the company met market commitments of improving operational performance compared with the prior six months, and a sustained particular focus on maintaining margins and volumes against tough market conditions.
“Although the results for the six months . . . were weaker than the comparative period to December 2016, we met our market commitment of improving our operational performance compared to the preceding six months ended June 2017,” said Jasco CEO Pete da Silva.
During the first half of the current financial year, operating profit contracted 1% year-on-year to R29.9-million, owing to the R5.8-million drop in profit in Intelligent Technologies; R1.5-million higher-than-expected losses in Kenya; additional group information technology costs, training costs, acquisition-related consulting costs and nondeductible value-added tax of R4.6-million; and unrealised foreign exchange losses of R3.6-million in December.
Profit attributable to ordinary shareholders decreased by 68% to R4.6-million during the six months to December 31.
Jasco achieved revenue of R557.2-million during the six months to December, a 7% hike on the R521.1-million in the period to December 2016, following the six-month revenue contribution of R84-million from Reflex Solutions.
The biggest profit contributor to the group, the Carrier business, reported a 4.7% decrease in revenue to R182.4-million as the major telecommunications operators continued to cut costs.
Operating profit performance increased marginally to R25.2-million.
The Enterprise segment reported a 40% surge in revenue to R207.4-million, with good progress made in improving its profitability, as the communications and security sectors reverse the prior losses and the recently-acquired Reflex Solutions starts delivering a strong top- and bottom-line contribution for a full six-month period.
Operating profit increased from R3.9-million in the six months to December 31, 2016, to R12.3-million in the six months under review.
The Intelligent Technologies unit, however, delivered a “disappointing” performance, with revenue declining 19.4% to R67.5-million and operating profit falling 60.9% to R3.8-million, owing to lower-than-expected volumes in the energy business owing to a continuing slowdown in project spend from major customers.
Electrical Manufacturers, where revenue ticked up 2.2% to R104.8-million, delivered steady top-line growth mainly owing to its diversification strategy and a growth in volumes from new customers.
The operating profit of the unit increased by R1-million to R9.5-million on higher margins and good cost control.
Meanwhile, within Jasco’s start-up international businesses, which was included in the Enterprise segment, the Kenya unit did not deliver on volume expectations owing to the sociopolitical situation in the country, while the Middle East business failed to gain the traction expected in the last six months as the group declined to accept three new projects owing to unacceptable commercial terms.
“The group will continue to operate against difficult economic and market conditions in all its markets. The extreme exchange rate volatility in South Africa also makes trading more difficult. In this context, our primary focus in the short-term will remain on delivering sustained profits through a combination of organic growth and carefully targeted acquisitions in key growth areas,” Da Silva said.
The group aims to maintain a focus on reducing costs and ensuring a continued improvement in sustainable profitability levels in all business units, as well as review the head office cost base.
Further, Jasco will carefully expand in East Africa by leveraging off the base established in Kenya and reassess the viability of the base in the United Arab Emirates and the markets in the Middle East and North Africa.