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- The financial losses faced by Jasco Electronics have cast doubt on the group as a going concern, although it retains this status.
- Jasco uncovered "gross misconduct" by the leadership team of its struggling security and fire division.
- Strikes hit the group's manufacturing business, resulting in a retrenchment process there, while over 100 staff were fired for gross misconduct.
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Jasco Electronics has warned shareholders its going concern status is in doubt, hinting that it may soon delist from the JSE. The company has faced a turbulent 2022 to date, which included firing dozens of employees for misconduct amid strikes, as well as implementing a forensic probe after uncovering alleged management misconduct in its security and fire division.
Valued at R80.8 million on the JSE, Jasco provides digital media equipment, components for energy solutions and manufactures electrical plugs, adaptors and extensions. Its 2022 results paint a clear picture of a company in distress, and as of the end of June, Jasco accumulated losses of R268.5 million.
The firm swung into a R16.3 million loss in its year to end-June, from profit of R6.5 million previously, hit by civil unrest and flooding in KwaZulu-Natal, supply chain disruptions that resulted in shortages for key products, a strike in its manufacturing business, as well as the discovery of gross misconduct in its security and fire division.
The company said on Wednesday the leadership team within its security and fire division had since left the group, while restructuring began in August. It has also decided to exit the fire business. In addition, a forensic investigation was launched in late July to evaluate the extent of mismanagement. "Initial findings have uncovered significant misrepresentation," it said.
Manufacturing was severely impacted by the social unrest, the national strike and a plant-level strike between March and June 2022. Due to the significant operating losses caused by the strike, a section 189 (retrenchment) review of the business commenced. In addition, 123 production employees were dismissed in June due to gross misconduct during the strike.
Jasco's net debt, excluding lease liabilities, fell over a third to R86.2 million to end-June, and it had tapped shareholders in February, netting R47.2 million. Jasco appointed a specialist financial advisory firm, Apeiron Capital, which assisted the group with the negotiations for the renewal of term loan facilities with the Bank of China. This was successfully concluded in December 2021, and Apeiron continues to provide specialist advice on its strategy, and will assist with a road show as it evaluates various options for debt refinancing.
The company said on Wednesday that - given support from Community Investment Holdings Projects, its biggest shareholder; the restructuring of its security and fire division; and a planned recovery in its manufacturing business - it did believe it had sufficient financing to continue its business as a going concern.
Further debt reduction will be required, either through another capital injection by its major shareholders or the potential disposal of another profitable business, it said.
"In the event of another capital raise, and if the group’s major shareholder invests further either with limited or no equity contributions from the rest of the shareholders, the free float trading on the stock exchange may fall to unacceptably low levels in terms of the JSE Listings Requirements. This could trigger an assessment of the viability of remaining listed on the stock exchange. A potential delisting from the stock exchange will reduce complexity and assist with significant cost reductions for the group," it said.
Jasco's shares were up 4.55% at 23c in afternoon trade on Wednesday, having fallen by about 40% over the past year.
