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Feb 06, 2012

Jasco says Spescom integration, restructuring starting to bear fruit

Jasco CEO Pete da Silva discusses the company's future focus points and concerns. Camera work: Nicholas Boyd, Editing: Darlene Creamer
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The benefits of JSE-listed Jasco’s successful integration with information and communication technology (ICT) firm Spescom, its restructuring and the improved contribution from the group’s investment in cable manufacturer M-Tec have started to flow through, CEO Pete da Silva said Monday.

The company reported 75% profit growth in the six months ended December 31, rising to R11.88-million, from R6.79-million a year earlier.

Following the combination of Jasco and Spescom, group revenue increased by 55% to R493.9-million, compared with R313.4-million in 2010, while operating profit increased by 30% to R20.6-million, from R15.9-million in the previous year.

Da Silva stated that this was mainly owing to the improvement in the group’s largest consolidated contributor, the ICT solutions vertical, as well as once off costs falling to R1.2-million from R4.2-million in the previous comparative period.

Meanwhile, headline earnings a share were up 96% to 6.9c a share, compared with 3.5c a share in the 2010 period, with earnings a share rising by 130% to 6.4c a share from 2.8c a share in 2010. The weighted average number of shares in issue increased from 116.5-million to 140.8-million shares.

“We are satisfied with the results, which indicate the benefits of our restructuring and a renewed focus on driving performance,” Da Silva noted.

The company had reinvigorated the organisation by creating a unified brand with a dedicated customer focus, flattening the organisational structure and reducing its cost base by R8-million a year.

“Although it is not the end of the road, we have delivered on our objectives so far, with positive feedback from customers, a stronger brand recognition and cross-selling across the group gaining traction,” he said.

Da Silva added that the company’s focus over the next six months would continue to be on ensuring sustainable performance at M-Tec and addressing underperformance at its product development house Enterprise Applications, while extracting further cost savings and improving working capital management.

“The benefits of operating as an integrated group, with clear verticals focused on targeted customer segments, have only started to kick in, with the medium- and longer-term outlook positive and several strategic opportunities in the short term. Further cost savings are set to be extracted from the business, such as the benefits from rightsizing and the impact of merged businesses and lower compliance and other costs,” he noted.

Further, the group’s bolt-on acquisition plan was reported to be on schedule, without sacrificing focus on organic growth and addressing problem areas in the business.

“We remain committed to ensuring earnings enhancement through both organic and acquisitive growth, while improving the return on equity on a sustainable basis,” Da Silva added.

To ensure a more integrated business development focus, the group was restructured last year under one Jasco brand into three verticals, namely, ICT Solutions, Industry Solutions and Energy Solutions.

ICT Solutions contains the telecommunications and information technology businesses of Jasco and Spescom, as well as the telecommunications arm of associate M-Tec. Industry Solutions contains Jasco’s previous security business and the recently acquired power and energy solutions company Ferro Resistant Technologies, while Energy Solutions contains Jasco’s previous domestic products division, Lighting Structures and M-Tec’s electrical arm.

Da Silva said the group would continue growing its market share in the mature carrier space, a vertical from which it has already experienced increased orders from current and new clients owing to a more focused sales offering.

On the enterprise side, the benefits of a lower cost base owing to rightsizing in a tough market would flow through in the second half of the financial year, with the aim to extract value from those customers where spend is taking place.

The high level of annuity income in the company’s ICT solution Enterprise Communication through ongoing service level agreements was expected to continue to provide some protection in the medium term.

Further, the Energy Solutions vertical would continue to drive its strategy of bolt-on acquisitions to position Jasco as a tier-two solutions provider in transmission, distribution and balance of plant business.

Looking at new horizons, Da Silva said the company was also turning its focus to the mining sector.

“We have completed Jasco’s entry into the fire solution market and want to diversify into the mining sector. We will use our fire detection and power solutions as a way into the mining sector and have started marketing in this regard,” he enthused.

Edited by: Mariaan Webb
Creamer Media Senior Researcher and Deputy Editor Online
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