Jasco Electronics has reported operating profit up by 46% for the six months to December 2018 and revenue up by 3,8% to R576,7-million.

All non-performing areas of the group were placed under restructure notice on 1 February 2019. This process is currently under way and will be completed in the
second half of this financial year. The group is also reviewing its head office cost structure.

The revenue increase was due mainly to a six-month revenue contribution of R18,3-million from RAMM Technologies in ICT-Enterprise and good growth in volumes from ICT-Carrier. This was partly offset by lower volumes in Energy and Electrical Manufacturers.

Operating profit before interest and taxation improved by 46% to R26-million. This was mainly due to the increase in profit in ICT-Carrier and ICT-Enterprise and ongoing cost containment.

Earnings before, interest, taxation, depreciation and amortisation (EBITDA) increased by 40% to R44,2-million.

Profit attributable to ordinary shareholders increased by 144% to R2,9-million. Earnings per share (EPS) increased by 143% to 1,3 cents per share. Headline earnings increased by 250% to R3-million and headline earnings per share increased by 248% to 1,3 cents per share.

The group structure has been amended to more closely align the businesses with their markets.

ICT-Carrier includes the Webb Industries, Hi-Sites and Carrier Solutions businesses and contributed 35% of group revenue.

Revenue increased by 9,5% to R200,1-million, mainly due to an increase in spend in Webb Industries for a network infrastructure roll-out by a major telecommunications operator. This was somewhat offset by a delay in orders from a large fibre to the home and business customer in Carrier Solutions.

This resulted in operating profit increasing by 29,6% to R32,8-million due to higher revenue and more efficient cost control. Operating margin improved to 16,4%.

ICT-Enterprise includes Enterprise Communications, Reflex Solutions, RAMM Technologies, Broadcast Solutions, Property Technology Management, Networks and Datavoice (Channel) and contributed 44% of group revenue.

Revenue for the year increased by 7,1% to R256,8-million, mainly due to the first six-month contribution of R18,3-million from RAMM Technologies and a large international project in the Datavoice (Channel) business. However, Reflex experienced lower revenue due to a slowdown in one-off project revenue from a fibre to the home customer compared to last year.

The Broadcast Solutions business also experienced revenue delays, which only materialised in the third quarter. The annuity service level agreement revenue base was maintained in Enterprise Communications.

This resulted in a 34,5% improvement in operating profit to R24,1-million and a margin of 9,4%. These increases were predominantly due to the strong performance from the Channel business and a first-time profit contribution from RAMM Technologies. This was offset by an anticipated slowdown in performance from Reflex, with its profit down 33% to R9,8-million.

Security & Fire includes Security Solutions, Jasco Technical Services and Jasco Fire Solutions and contributed 5% of group revenue.

Revenue was flat at R31,2-million following lower than expected volumes in Security due to a continuing slowdown in project spend from a major banking customer on a reduction in branch footprint. In the third quarter, the Security business secured a significant project for an international data centre customer for execution in the second half of the year. The Fire business secured a good order book in the first half, with a number of projects only forecast to be completed in the second half.

Based on flat revenue at lower gross margins, the operating loss increased from R4-million in December 2017 to R6,1-million on a similar cost base. The overhead expenses were reviewed in the third quarter and a restructure was undertaken. This will be concluded by the end of the second half, with benefits to flow through in the next financial year. This business will be closely monitored for the remainder of F2019 to ensure a turnaround.

Energy includes Jasco Power and Jasco Renewables and contributed 1% of group revenue.

During the period, revenue declined by 28,4% to R4,7-million following lower than expected volumes in Renewables. The Power business had a slow start to the year, but experienced an improvement in volumes during the third quarter for uninterruptible power solutions following Eskom’s electricity crisis and regular load shedding.

These two businesses were merged in 2018 to reduce overhead costs, which led to the operating loss improving from a loss of R4-million in December 2017 to a loss of R2,7-million.

During the third quarter, sales capability was strengthened, with a renewed focus on securing additional projects with the group’s photo-voltaic solutions specifically targeting the high electricity tariff market segment. The business will be closely monitored for the remainder of F2019 to ensure a turnaround, given the current market environment.

Electrical Manufacturers contributes 15% of group revenue.

Revenue in Electrical Manufacturers decreased by 14,3% to R89,8-million. The decline followed lower volumes from its key customers due to the technical recession in the South Africa economy in the first quarter, which led to lower demand for white-goods appliances. Although the volumes returned in the second and third quarters, the lost volumes will not be recouped for the full year.

The operating profit of R1,9-million decreased from R9,5 million on the lower volumes and resultant lower gross margins. Although cost control remains very tight, the operating margin of 2,2% declined from 9,1% last year.

The continued focus on diversifying the revenue base is delivering good results, with reduced reliance on the group’s main customer and an improved margin mix. This focus will continue and should start improving margins in the second half of F2019.