Jasco eyes opportunities in lucrative energy sector

JSE-listed Jasco seeks to take advantage of the “very exciting” energy sector in South Africa, and would position itself as a tier-two player providing distribution and transmission equipment to independent power producers (IPPs), the firm said on Tuesday.

The company currently supplies cables and associated cables for the energy sector, as well as low- and medium-voltage solutions, such as voltage stabilisers and transformers. The Jasco Energy Solutions division would build additional competencies in the sector, through small ‘bolt-on’ acquisitions.

New Jasco CEO Pete da Silva said that the company was excited about this division, and was already engaging municipalities, IPPs and tier-one suppliers, such as Siemens, General Electric and Alstom.

Jasco Energy Solutions would not be an operator or generator in the energy sector, but would increase its deliverables to the industry.

Da Silva said that the deregulation of the sector in South Africa, and the introduction of IPPs meant opportunities for the company, as IPPs and suppliers required local partners for distribution networks and balance of plant projects.

He was encouraged by the recent renewable energy bidders conference, which attracted some 700 participants.

Jasco’s Energy Solutions division currently generates about R150-million a year in revenue, and the company has set a target of generating R350-million a year in the next two to three years.

Jasco has implemented its “restructured for growth” strategy, which Da Silva said was a flatter organisational structure, seeking business in more diversified markets and geographies.

He emphasised the importance of a unified Jasco brand, which encourages cross selling between divisions.

Rather than dealing with numerous smaller companies under the larger Jasco umbrella, Jasco has restructured into three verticals for correct business segmentation.

These were the Jasco Energy Solutions division, the Jasco Industry Solutions division and the Jasco Information Communications and Technology (ICT) division. The minimum revenue expected from each of the three divisions over the next two to three years was R350-million a year.

Jasco Industry Solutions incorporated the company’s security solutions, which currently generate about R150-million in revenue a year. Da Silva noted that the annuity income in this division was declining and could no longer be relied on, thus the division would have to acquire new competencies.

He noted that currently the Jasco offering included surveillance systems, access control, and some fire detection, but the division would focus on developing it’s portfolio to include building management, control systems, energy efficiency, and fire solutions.

These additional services, said Da Silva, were required by customers as standard nowadays.

Jasco Industry Solutions would also work on diversifying its client base, from largely financial services at present, to manufacturing, mining, and government sectors in future.

“Jasco Industry Solutions has a hyperactive and focused team, and I have no doubt they will get their act together and we will see developments here,” emphasised Da Silva.

Jasco ICT Solutions, which incorporated the newly acquired Spescom and Maringo, as well as a number of others, was a division that Da Silva said was operating in a mature market, and thus the objective would be to grow market share by taking it away from competitors.

Da Silva said that he was happy with the way that this division had “gelled”, and he was certain that it would perform well in the future and achieve growth.

Da Silva was speaking at the company’s year-end financial results, where FD Warren Prinsloo added that the company managed to grow in tough trading conditions.

Reported group operating profit declined by 11% on the prior year to R28.8-million, from R32.3-million in 2010. However, the company said that like for like operating profit increased by 42% to R42.3-million, largely attributable to the domestic products division boost from the Snapper range’s good volumes achieved.

There was also the benefit from a reduced cost base in the telecommunications division, which offset the lower sales impact during the second half.

The group revenue increased by 38% to R773-million, owing largely to additional revenue generated from newly acquired businesses.

A dividend of 2.5c a share was announced, and following the interim dividend of 3c a share announced in December, this brought the total dividend for the year to 5.5c a share. This amounted to some R3.3-million in dividends paid for the 2011 financial year.