Jasco to review its strategy
Group may sell fire business if it cannot find a suitable acquisition after Competition Commission rejects deal
Electronics group Jasco Electronics may sell its fire business if it fails to make an acquisition that will beef up the unit.
This comes after its proposed acquisition of Cross Fire Management was prohibited by the Competition Commission, saying that the merger would probably lead to a consolidation of the market in Gauteng and the Western Cape and result in a reduction of the number of companies in markets that are already highly concentrated.
Jasco is active in the fire protection industry and it manufactures pipes used in fire protection systems.
The commission also referred seven firms specialising in installing and maintaining fire control and protection systems, including Cross Fire Management, to the Competition Tribunal for prosecution.
Jasco group CEO Pete da Silva said that, while the group disagreed with the commission, it decided not to challenge the decision and would wait for the authorities’ outcome on the investigation into the industry.
Jasco will either try to acquire Cross Fire again, buy another company in the same market or sell its fire business.
"We will be re-evaluating our strategy in the next few weeks. But I will not stay with the fire business as it is way too small. It’s either we bulk it up or sell it," he said.
Jasco has exited nonperforming assets, while others were merged with other businesses within the group.
It may exit the electrical manufacturing business, which makes components for Defy.
Da Silva said that although the business had expanded its customer base and was doing well, Jasco would sell it in the medium-term "when the right offer comes".
He said Jasco was a high-level technology integrator and manufacturing was not a core business, hence it sold M-Tec. Jasco, which reported year-end results on Wednesday, said revenue fell 3%, to R1.044bn, while earnings per share were down 43%, to 3.6c.
Operating profit was marginally up at R41.9m, mainly due to improved gross margins and once-off cost reductions.
Da Silva said the group was hit by a number of once-off non-tax deductible issues such as the acquisition costs of Reflex Solutions. The business was bought in May for about R40m and has contributed R28.3m in revenue and R4.5m in profit before tax in the first two months. Reflex Solutions has given Jasco entry into the fibre-to-the-home market and expanded its IT infrastructure.
Da Silva expects overall performance to improve in the 2018 financial year.
He also expects to sign the group’s first contract in the Middle East, where it has been short-listed for the renewable energy businesses.
Jasco’s share price has fallen by 30.8% since January to 65c.