Jasco slides into the red in first half

31st March 2020 By: Natasha Odendaal - Creamer Media Senior Deputy Editor

Information and communication technology (ICT) group Jasco posted a weaker year-on-year performance, impacted by a slowdown in infrastructure spend resulting in poor results from ICT-Carriers and continuing losses in Power and Renewables, during the half-year ended December 31, 2019.

Despite the good performance from ICT-Enterprise, including Datavoice and Reflex Solutions, the turnaround of Security and Fire, and a strong first half by Electrical Manufacturers, earnings for the six months under review contracted into the red.

The group’s headline earnings a share and earnings a share decreased from 1.3c a share to a loss of 5.2c and 6c respectively during the six months ended December 31, 2019, the company said in its financial results on March 31.

However, this was an improvement on the 11.9c headline loss a share and the 14c loss a share posted in the preceding six months to June 2019.

“Although the performance from continuing operations for the six months to December 2019 was weaker than the comparative period to December 2018, it improved from the preceding six months ended June 2019,” Jasco commented.

Jasco reported a R19.1-million loss in December 2019, compared with the profit attributable to ordinary shareholders from continuing operations of R1.6-million in December 2018.

However, this was an improvement of R23.6-million from the R42.7-million loss in the preceding six months ended June 2019.

“Including the profit from the discontinued operation, the total profit attributable to ordinary shareholders decreased from a profit of R2.9-million in December 2018 to a R13.5-million loss in December 2019,” Jasco added, noting that this was also an improvement of R23.9-million from the R37.4-million loss in the preceding six months ended June 2019.

ICT-Carriers' revenue decreased by 50% to R100-million, mainly in Webb Industries owing to a slowdown in spend for a network infrastructure roll-out by a major telecommunications operator.

Operating profit for the unit decreased 89.7% to R3.4-million on the back of the lower revenue during the six months under review.

In the Power and Renewables business unit, revenue declined by 31.5% to R3.2-million owing to a lack of projects.

“To address this, the business model was changed from being an engineer, procure and construct provider to a power purchase agreement and rent-to-own provider,” the company said.

The operating loss deteriorated from a loss of R2.7-million in December 2018 to a loss of R3.2-million owing to additional sales resource capacity being employed to secure new revenue with the change in the business model.

Meanwhile, the revenue from ICT-Enterprise increased 9% to R279.9-million with strong volumes reported from Reflex Solutions, new international projects in Datavoice and the extension of a co-location services maintenance contract for a regional telecommunications operator.

Security & Fire's revenue increased by 53.3% to R47.8-million, attributable to higher volumes of projects with new customers, and the unit turned the corner with an operating profit of R900 000 during the six months ended December 2019, compared with a loss of R6.1-million in December 2018

Electrical Manufacturers' revenue increased by 29.1% to R115.9-million as volumes increased from its major customer.

The operating profit increased by 331.2% to R8.5-million.

“The group continues to operate against difficult economic and market conditions in all its markets, with the outbreak of Covid-19 creating exceptionally challenging conditions,” Jasco warned.

However, the firm will focus on executing its strategy, maintaining its focus on costs and ensure a continued improvement in sustainable profitability levels in all business units; reduce the financial gearing below the internal target of 50% from the cash generated by Jasco's operations; add new products and services to its portfolio, with an emphasis on new organic fast-growing and higher-margin business areas; and continue transforming the group to remain relevant.

“Jasco's primary focus in the short-term will therefore remain on delivering sustained profits through a combination of organic growth and cost containment, subject to the impact of Covid-19 on the business. The full impact of this cannot yet be fully determined,” Jasco said.

Meanwhile, Jasco completed the restructure of the cost base at head office at the end of February 2020 and ICT-Carriers will be concluded by the end of April 2020.

“A solution has been found for the Midrand offices and will result in further savings for the head office. However, the group expects any related cost reductions to materialise only in the new financial year starting in July 2020,” the company continued.

Further, the disposal of Jasco's Electrical Manufacturers business is well advanced, with all suspensive conditions expected to be met before the end of April 2020.