JSE-listed Jasco on Thursday urged shareholders to vote in favour of the sale of its 51% stake in nonferrous products manufacturer and supplier Malesela Taihan Electric Cable (M-Tec), which has been a continuous drag on the group’s past results and has hindered progress in its strategy.

With a full year having passed since the completion of Jasco’s successful three-year restructure, M-Tec’s continued underperformance had weighed on the group’s otherwise improved overall performance in the financial year to June 30.

M-Tec’s impairment of R57.4-million, which accounted for more than half of the company’s one-off costs and impairments of R101.1-million during the year under review, pushed the company to a loss a share of 38.7c, compared with earnings a share of 3.1c in the prior year.

With five management changes within a four-year period, a dependency on major customer power utility Eskom, and its exposure to a volatile commodity price environment and exchange rate, the subsidiary delivered a loss before tax of R36-million for the year under review – a contraction on the profit before tax of R500 000 achieved last year.

“I cannot stress enough how important it is for us to exit this business,” CEO Pete da Silva told shareholders at the group’s year-end financial presentation ahead of a November shareholder meeting, where the proposal for major shareholder, black–owned investment holding company Community Investment Holding’s (CIH’s) R60-million buy-out of the stake, would be put to a vote.

CIH would provide for an initial payment of R20-million, followed by R40-million paid in instalments over a period of three years.

The disposal of M-Tec would not only enable management to shift its full, undivided attention to Jasco's core business, but also strengthen its balance sheet and reduce its debt and debt-to-equity ratio from the current 73.3% to 50% over the next two years, using the proceeds from the sale.

While “regretting” the impairment, which was the result of an independent valuation and subsequent writedown from its carrying value of R115.4-million, and subsequent shareholder value “destruction”, Da Silva insisted that exiting this business had become crucial.

However, the full benefit of the group’s three-year restructure was evident in the second half of the year, with all other businesses outside of Electrical Manufacturers – which was affected by the metals and engineering industries sector strike in the first half of the year – improving their performance, with particularly good volumes delivered by the Carrier and Enterprise businesses in the fourth quarter.

Jasco posted a loss for the year to June of R82.9-million, dipping into the red after achieving a profit of R6.6-million in 2014; however, the listed firm’s headline earnings a share surged from 0.6c in 2014 to 2.4c during 2015, while headline earnings were up from R1-million to R5.1-million over the same period.

Revenue increased 8% to R1.1-billion, with all of Jasco’s business units achieving revenue increases, barring Electrical Manufacturers, which contracted 10%.