Jasco streamlines business, moves away from manufacturing
Growth seen in technology and renewable energy businesses
Even in the face of low economic growth locally, Mark van Vuuren, CEO of electronics firm Jasco, says he anticipates growth in the group’s technology and renewable energy businesses.
The company said on Friday revenue for the year to end-June marginally declined to R1.14bn, compared to R1.15bn in the previous year.
Earnings before interest, tax, depreciation and amortisation (ebitda) were up 4% to R118.9m, but group loss per share widened to 12.9c from a loss per share of 3.3c the previous period. Headline loss per share was 10.7c from a loss of 1.5c per share the previous corresponding period.
Van Vuuren told Business Day that the company was restructuring to focus on three main areas: information communication technology (ICT), power and renewable energy, as well as security and fire solutions.
The ICT business remains Jasco’s biggest business, accounting for about 75% of turnover, Van Vuuren said. The introduction of the high-speed network 5G and continued increasing demand of data centres was likely to drive growth in this segment, he said. This is because 5G sites and data facilities require fibre for connectivity, a business that Jasco is already in.
The power and renewable energy business accounts for less than 5% of Jasco's business, Van Vuuren said, having contributed about R9.9m to revenue. Growth in this segment is likely to be driven by power-generation projects as consumers and businesses have begun to invest more in independent power generation systems.
Jasco’s plan is to move from a physical-product selling model to annuity-based income. The company plans to move from selling solar power-generation units, to rather build infrastructure that customers can lease for 15-20 years through a power-purchasing agreement.
The security and fire arm deals with access control and fire suppression technology. Van Vuuren said the unit accounts for about 10% of their business and had good growth in the past year, having seen a 17% increase in orders.
To complete its shift in focus, Jasco is shutting down and selling off its electrical manufacturing assets. The company makes electrical plugs, adaptors and extensions, among a number of products.
Jasco said it had sold its entire stake in its Electrical Manufacturers Division to African Zaibatsu Corporation for R65m. The division had contributed R6.5m profit after tax to Jasco's bottom line, from R76.9m in revenue for the year.
Jasco said it was working hard to reduce its debt. It said the current gearing of 81.4% was well above its 50% benchmark. The working capital requirement has resulted in it increasing its debt obligations by R20m, including loans from the Bank of China.
Van Vuuren said the proceeds from selling its manufacturing assets will be used to pay down its debts.
“If you then look at our gearing ratios, we have set ourselves internal targets to get our gearing ratio below 50%. So once we’ve finished this disposal of electrical manufacturing, our gearing level will come back in line.”