Wrap Text
MST - Mustek Limited - Reviewed financial results for the six months ended 31
December 2010
Mustek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST ISIN: ZAE000012373
("Mustek" or "the Group")
Reviewed financial results for the six months ended 31 December 2010
Headline earnings per share up 14,2%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Unaudited Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2010 2009 2010
R000 R000 R000
(Restated) (Restated)
Revenue 1 624 807 1 601 610 3 409 515
Cost of sales (1 391 629) (1 349 491) (2 923 883)
Gross profit 233 178 252 119 485 632
Other income 21 134 15 177 20 626
Distribution, (191 050) (197 199) (378 227)
administrative and other
operating expenses
Profit from operations 63 262 70 097 128 031
Investment revenues 3 390 6 569 15 269
Finance costs (14 869) (27 625) (53 132)
Other gains and (losses) - 207 (2 480)
Profit before tax 51 783 49 248 87 688
Income tax expense (10 642) (12 442) (23 228)
Profit for the period 41 141 36 806 64 460
Other comprehensive
income
Exchange (losses) gains (1 233) 1 002 (2 322)
on translation of foreign
operations
Other comprehensive (1 233) 1 002 (2 322)
income for the year, net
of tax
Total comprehensive 39 908 37 808 62 138
income for the year
Profit attributable to:
Equity holders of the 39 572 34 917 61 439
parent
Non-controlling interest 1 569 1 889 3 021
41 141 36 806 64 460
Total comprehensive
income attributable to:
Equity holders of the 38 339 35 919 59 048
parent
Non-controlling interest 1 569 1 889 3 090
39 908 37 808 62 138
Earnings and dividend per
share (cents)
Weighted number of 109 547 165 110 449 804 110 254 438
ordinary shares in issue
Ordinary shares in issue 109 547 165 110 449 804 109 547 165
Basic earnings per 36,12 31,61 55,73
ordinary share
Diluted basic earnings 36,12 31,61 55,73
per ordinary share
Dividend per ordinary 12,00 10,00 10,00
share - paid
Dividend per ordinary 0,00 0,00 12,00
share - proposed
Headline earnings per
share (cents)
Headline earnings per 36,20 31,69 56,41
ordinary share
Diluted headline earnings 36,20 31,69 56,41
per ordinary share
Reconciliation between
basic and headline
earnings
Basic earnings 39 572 34 917 61 439
attributable to equity
holders of the parent
Group`s share of loss on 82 87 742
disposal of property,
plant and equipment
Headline earnings 39 654 35 004 62 181
Net asset value per share 586,74 539,60 563,41
(cents)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Unaudited Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2010 2009 2010
R000 R000 R000
(Restated) (Restated)
ASSETS
Non-current assets
Property, plant and equipment 137 781 151 650 143 602
Intangible assets 73 469 66 715 72 114
Investments in associates 7 706 5 708 6 364
Other investments and loans 34 909 35 146 36 009
Deferred tax asset 20 370 24 012 22 025
Non-current trade and other 69 10 569 2 619
receivables
274 304 293 800 282 733
Current assets
Inventories 586 647 488 172 574 479
Trade and other receivables 579 979 612 451 591 200
Foreign currency assets 1 197 142 2 057
Tax assets 4 899 5 216 12 884
Bank balances and cash 166 577 244 685 259 953
1 339 299 1 350 666 1 440 573
TOTAL ASSETS 1 613 603 1 644 466 1 723 306
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 877 884 877
Ordinary share premium 122 850 124 395 122 484
Retained earnings 519 244 466 296 492 818
Property revaluation reserve - - -
Non-distributable reserve 4 116 4 116 4 116
Foreign currency translation (4 329) 297 (3 096)
reserve
Equity attributable to equity 642 758 595 988 617 199
holders of the parent
Non-controlling interest 25 615 20 377 24 552
Total equity 668 373 616 365 641 751
Non-current liabilities
Long-term borrowings 106 374 299 349 132 514
Deferred tax liabilities 3 568 2 192 3 591
109 942 301 541 136 105
Current liabilities
Short-term borrowings 117 230 31 557 77 518
Trade and other payables 522 686 512 271 732 538
Provisions 11 040 7 968 15 056
Foreign currency liabilities 21 961 404 161
Deferred income 19 306 23 810 20 507
Tax liabilities 8 261 1 481 13 847
Bank overdrafts 134 804 149 069 85 823
835 288 726 560 945 450
Total liabilities 945 230 1 028 101 1 081 555
TOTAL EQUITY AND LIABILITIES 1 613 603 1 644 466 1 723 306
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Unaudited Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2010 2009 2010
R000 R000 R000
Operating activities
Cash receipts from 1 638 578 1 523 335 3 353 070
customers
Cash paid to suppliers and (1 755 178) (1 513 610) (3 122 539)
employees
Net cash (used in) from (116 600) 9 725 230 531
operations
Investment revenues 3 390 5 854 14 553
received
Finance costs paid (14 869) (27 625) (53 132)
Dividends received - 715 716
Dividends paid (13 146) (11 045) (11 045)
Income taxes paid (6 611) (19 772) (22 229)
Net cash (used in) from (147 836) (42 148) 159 394
operating activities
Net cash used in investing (8 093) (20 219) (23 062)
activities
Net cash from (used in) 62 553 (31 553) (214 984)
financing activities
Net decrease in cash and (93 376) (93 920) (78 652)
cash equivalents
Cash and cash equivalents 259 953 338 605 338 605
at beginning of the period
Cash and cash equivalents 166 577 244 685 259 953
at the end of the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary
share share Retained
capital premium earnings
R000 R000 R000
Balance at 30 June 2009 - As 884 123 583 447 294
previously reported
Reversal of revaluation and related - - -
deferred tax
Reclassification of at acquisition - - (4 870)
revaluations net of deferred tax
Balance at 30 June 2009 - Restated 884 123 583 442 424
Profit for the period - - 34 917
Other comprehensive income - - -
Recognition of share-based payments - 812 -
Dividends paid - - (11 045)
Balance at 31 December 2009 884 124 395 466 296
Profit for the period - - 26 522
Other comprehensive income - - -
Recognition of share-based payments - 609 -
Investment in subsidiary - - -
Buy back of ordinary shares (7) (2 520) -
Balance at 30 June 2010 877 122 484 492 818
Profit for the period - - 39 572
Other comprehensive income - - -
Recognition of share-based payments - 366 -
Dividends paid - - (13 146)
Investment in subsidiary - - -
Balance at 31 December 2010 877 122 850 519 244
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Foreign
Property Non- currency
revalua- distri- trans-
tion butable lation
reserve reserve reserve
R000 R000 R000
Balance at 30 June 2009 - As 12 048 - (1 605)
previously reported
Reversal of revaluation and (12 048) 146 -
related deferred tax
Reclassification of at acquisition - 3 970 900
revaluations net of deferred tax
Balance at 30 June 2009 - Restated - 4 116 (705)
Profit for the period - - -
Other comprehensive income - - 1 002
Recognition of share-based - - -
payments
Dividends paid - - -
Balance at 31 December 2009 - 4 116 297
Profit for the period - - -
Other comprehensive income - - (3 393)
Recognition of share-based - - -
payments
Investment in subsidiary - - -
Buy back of ordinary shares - - -
Balance at 30 June 2010 - 4 116 (3 096)
Profit for the period - - -
Other comprehensive income - - (1 233)
Recognition of share-based - - -
payments
Dividends paid - - -
Investment in subsidiary - - -
Balance at 31 December 2010 - 4 116 (4 329)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable
to equity Non-
holders Control-
of the ling
parent interest Total
R000 R000 R000
Balance at 30 June 2009 - As 582 204 18 488 600 692
previously reported
Reversal of revaluation and (11 902) - (11 902)
related deferred tax
Reclassification of at - - -
acquisition revaluations net of
deferred tax
Balance at 30 June 2009 - 570 302 18 488 588 790
Restated
Profit for the period 34 917 1 889 36 806
Other comprehensive income 1 002 - 1 002
Recognition of share-based 812 - 812
payments
Dividends paid (11 045) - (11 045)
Balance at 31 December 2009 595 988 20 377 616 365
Profit for the period 26 522 1 132 27 654
Other comprehensive income (3 393) 69 (3 324)
Recognition of share-based 609 - 609
payments
Investment in subsidiary - 2 974 2 974
Buy back of ordinary shares (2 527) - (2 527)
Balance at 30 June 2010 617 199 24 552 641 751
Profit for the period 39 572 1 569 41 141
Other comprehensive income (1 233) - (1 233)
Recognition of share-based 366 - 366
payments
Dividends paid (13 146) - (13 146)
Investment in subsidiary - (506) (506)
Balance at 31 December 2010 642 758 25 615 668 373
CONDENSED SEGMENT ANALYSIS
Total Mustek
6 Months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2010 2009 2010 2009
R000 R000 R000 R000
Business segments (Restated) (Restated)
Revenue 1 624 807 1 601 610 692 283 719 417
EBITDA* 75 614 84 427 36 431 53 155
Depreciation and (12 352) (14 330) (7 085) (8 752)
amortisation
Profit (loss) from 63 262 70 097 29 346 44 403
operations
Investment revenues 3 390 6 569 660 5 055
Finance costs (14 869) (27 625) (110) (12 887)
Other gains - 207 - 207
Profit (loss) before 51 783 49 248 29 896 36 778
tax
Income tax (expense) (10 642) (12 442) (5 765) (10 378)
benefit
Profit (loss) for the 41 141 36 806 24 131 26 400
period
Attributable to:
Equity holders of the 39 572 34 917 24 113 26 400
parent
Non-controlling 1 569 1 889 18 -
interest
41 141 36 806 24 131 26 400
*Earnings before interest, taxation, depreciation and amortisation.
CONDENSED SEGMENT ANALYSIS (continued)
Rectron Comztek
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2010 2009 2010 2009
R000 R000 R000 R000
Business segments
Revenue 728 499 724 074 236 892 182 505
EBITDA* 35 532 30 125 9 185 7 564
Depreciation and (4 134) (4 762) (1 133) (816)
amortisation
Profit (loss) from 31 398 25 363 8 052 6 748
operations
Investment revenues 5 725 5 140 1 615 1 949
Finance costs (9 613) (10 202) (5 136) (4 536)
Other gains - - - -
Profit (loss) before tax 27 510 20 301 4 531 4 161
Income tax (expense) (6 512) (4 554) (1 208) (754)
benefit
Profit (loss) for the 20 998 15 747 3 323 3 407
period
Attributable to:
Equity holders of the 19 553 13 590 3 217 3 675
parent
Non-controlling interest 1 445 2 157 106 (268)
20 998 15 747 3 323 3 407
*Earnings before interest, taxation, depreciation and amortisation.
CONDENSED SEGMENT ANALYSIS (continued)
Group Eliminations
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2010 2009 2010 2009
R000 R000 R000 R000
Business segments (Restated)
Revenue - - (32 867) (24 386)
EBITDA* (5 534) (6 417) - -
Depreciation and - - - -
amortisation
Profit (loss) from (5 534) (6 417) - -
operations
Investment 153 - (4 763) (5 575)
revenues
Finance costs (4 773) (5 575) 4 763 5 575
Other gains - - - -
Profit (loss) (10 154) (11 992) - -
before tax
Income tax 2 843 3 244 - -
(expense) benefit
Profit (loss) for (7 311) (8 748) - -
the period
Attributable to:
Equity holders of (7 311) (8 748) - -
the parent
Non-controlling - - - -
interest
(7 311) (8 748) - -
*Earnings before interest, taxation, depreciation and amortisation.
Total South Africa
6 Months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2010 2009 2010 2009
R000 R000 R000 R000
Geographical segments (Restated)
Revenue 1 624 807 1 601 610 1 505 820 1 494 562
Profit (loss) before 51 783 49 248 50 359 47 748
tax
Income tax expense (10 642) (12 442) (10 003) (11 316)
Profit (loss) for 41 141 36 806 40 356 36 432
the period
Attributable to:
Equity holders of 39 572 34 917 39 624 35 477
the parent
Non-controlling 1 569 1 889 733 955
interest
41 141 36 806 40 356 36 432
Mustek East Africa Rectron Australia
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2010 2009 2010 2009
R000 R000 R000 R000
Geographical segments (Restated) (Restated)
Revenue 10 835 14 332 62 413 60 805
Profit (loss) before (490) 296 2 219 2 748
tax
Income tax expense - (79) (312) (614)
Profit (loss) for the (490) 217 1 907 2 134
period
Attributable to:
Equity holders of the (490) 217 954 1 067
parent
Non-controlling - - 954 1 067
interest
(490) 217 1 907 2 134
Comztek Africa
6 months 6 months
31 Dec 31 Dec
2010 2009
R000 R000
Geographical segments (Restated)
Revenue 45 739 31 911
Profit (loss) before tax (305) (1 544)
Income tax expense (327) (433)
Profit (loss) for the period (632) (1 977)
Attributable to:
Equity holders of the parent (515) (1 844)
Non-controlling interest (117) (133)
(632) (1 977)
COMMENTARY
1. Statement of compliance
These condensed financial statements for the six months ended 31 December 2010
are prepared in accordance with International Financial Reporting Standards
("IFRS") applicable to interim financial reporting (IAS 34), the Listings
Requirements of the JSE Limited and the Companies Act of South Africa, as
amended.
2. Accounting policies
The accounting policies applied in the preparation of these abridged reviewed
financial statements, which are based on reasonable judgments and estimates, are
in accordance with International Financial Reporting Standards (IFRS). These are
consistent with those applied in the annual financial statements for the year
ended 30 June 2010, except for a change in the accounting policy adopted for the
measurement of property, plant and equipment from the revaluation model to the
cost model as allowed in IAS16 - Property, Plant and Equipment, for the period
ended 31 December 2010. Furthermore, the comparative information has been
reclassified in order to disclose computer software as intangible assets rather
than property, plant and equipment.
The change in accounting policy has resulted in the restatement of the following
statement of financial position balances as at
31 December 2009
:
Property,
plant De- De-
Intan- and ferred ferred
R000 gible equip- tax tax
Dr/(Cr) assets ment asset liability
Balance as previously 56 601 175 185 23 694 (3 550)
reported
Restatement impact 10 114 (23 535) 318 1 358
Restated balance 66 715 151 650 24 012 (2 192)
Foreign
Property Non- currency
revalua- distri- Re- trans-
R000 tion butable tained lation
Dr/(Cr) reserve reserve earnings reserve
Balance as previously (12 048) - (471 133) 727
reported
Restatement impact 12 048 (4 116) 4 837 (1 024)
Restated balance - (4 116) (466 296) (297)
3. Review report
The consolidated financial results for the six months ended 31 December 2010 and
this set of summarised financial information have been reviewed, but not audited
by Deloitte & Touche, whose unmodified review report is available for inspection
at the Company`s registered office.
4. Corporate governance
The Group subscribes to and complies in all material aspects with the Code on
Corporate Governance Practices and Conduct as contained in the King II Report on
Corporate Governance. The Group has launched initiatives to understand, align
with and incorporate the principles of the King III report into the operations
of the board, management and business.
5. Transformation
Management has continued to meaningfully extend its initiatives in employment
equity, skills development and corporate social investment during the period.
The Group is committed to a process of further transformation and economic
empowerment of its stakeholders, such that an acceptable balance between the
operatives and commercial benefits of such a process can be achieved, thereby
ensuring the sustainability of the Group in a competitive market sector.
6. Board of directors
No changes were made to the board during the period under review. Total
remuneration paid to directors for the period under review amounted to R3,3
million (2009: R3,1 million) and share-based payments of R0,2 million (2009:
R0,5 million) were expensed relating to directors.
7. Cash flow
A significant reduction in trade and other payables contributed to the R116,6
million cash utilised in operations (31 December 2009: R9,7 million cash from
operations). In line with historic trends, this is expected to reverse in the
period through to June 2011.
8. Corporate activities
The Group acquired a further 25% of Digital Surveillance Systems (Pty) Ltd on 1
December 2010 for R1,9 million and acquired a 40% stake in Continuous Power
Systems (Pty) Ltd on 14 December 2010 for a nominal amount after advancing a
loan of R1,3 million.
9. Operating results
Volumes increased by approximately 8%, but a significantly stronger average
exchange rate of R7,09 to the US dollar compared to R7,63 in the corresponding
comparative period, negatively affected revenue and restricted revenue growth to
1,4%.
Distribution, administrative and other operating expenses (excluding foreign
exchange profits and losses) decreased by 3,1%.
Rectron contributed R19,6 million (31 December 2009: R13,6 million) to the
Group`s net profit despite tough trading conditions with technology becoming
more commoditised and consumers spending less. Sound financial management,
inventory optimisation and a renewed focus on their customers contributed to
their continued success.
10. Retirement benefit plan
The Mustek Group Retirement Fund is a defined contribution fund and payments to
the plan are charged as an expense as they fall due. The majority of the Group`s
employees belong to this fund. The Group does not provide additional post-
retirement benefits.
11. Industry outlook
The buzz around tablet form factor systems continues unabated. Every large
manufacturer has announced or released product to compete with the iPad. Most
manufacturers have chosen to either release products based on Microsoft Windows
or Google Android.
Microsoft has not yet announced a tablet specific version of its operating
system. Although this might limit the appeal to the consumer, the business
community still represents a bigger portion of the market. The ability to run
line of business applications on a tablet without modification broadens the
device`s appeal.
The notebook sector remains the most popular form factor. We expect the tablet
to take market share from the netbook segment. The desktop segment remains
consistent. It`s still the format of choice where portability is not required
because data protection is easily achieved via physical and perimeter security,
a much lower total cost of ownership and superior performance.
The access to broadband in South Africa is improving but price remains an
obstacle. It is rather significant that the fastest consumer internet service
provider is a mobile provider. Uncapped ADSL has been with us for a year and
despite many dire warnings the sky has not fallen. The WACS (West Africa Cable
System) with a capacity of 5.12Tbps is due this year and we expect even more
pressure on ISP`s and a second round of price drops. It is also encouraging that
providers are investigating ways of providing this connectivity to rural
communities. Mustek`s experience in providing computing to schools in these
areas will be invaluable in capitalising on more projects now that connectivity
is feasible and more affordable.
12. Company outlook
The company is focusing on increasing volumes as it remains a driver of
performance across our operations.
The Group is placing increased focus on working capital management in order to
reduce finance costs further.
Mustek`s outlook remains focused on sustainable growth. Opportunities for
further optimisation, improved production, further consolidation and cost
management will be explored. Enhanced cash flow will be used prudently to
further reduce our debt.
13. Dividend
The declaration of cash dividends will continue to be considered by the board in
conjunction with an evaluation of current and future funding requirements, and
will be adjusted to levels considered appropriate at the time of declaration.
Mustek`s continued commitments to optimal cash utilisation will mean that cash
generated by the operations will be used to fund our growth and reduce our debt.
In line with the dividend policy, no interim dividend will be paid.
14. Cautionary announcement
Shareholders are referred to the cautionary announcement by Mustek on 15
December 2010 on the Securities Exchange News Service ("SENS") and in the press
on 17 December 2010, renewed on SENS on 28 January 2011 and in the press on 31
January 2011, regarding the expression of interest to effect the buy-out and
delisting of Mustek by a consortium led by the company`s chief executive
officer, David Kan and the Trinitas Private Equity Fund. Shareholders are
advised that discussions are still in progress and are therefore required to
continue exercising caution when dealing in the company`s securities until a
further announcement is made.
15. Post balance sheet events
Rectron, a wholly owned subsidiary of Mustek, has entered into a Sale of Shares
Agreement on 31 January 2011 whereby Rectron disposed of its 60% stake in Corex
IT Distribution Dynamics (Pty) Ltd to Chao-Chung (Fred) Lu for a total cash
consideration of R9 790 549 with effect from 1 January 2011.
There have been no other significant events subsequent to the period-end up
until the date of this report that requires adjustment or disclosure.
On behalf of the board of directors
David Kan Neels Coetzee
Chief Executive Officer Financial Director
25 February 2011
Corporate information: www.mustek.co.za
Company secretary: Neels Coetzee
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107, South Africa
Telephone: +27 (0) 11 370-5000
Registered office: 322 15th Road, Randjespark, Midrand, 1685 Postal
address: PO Box 1638, Parklands, 2121
Contact numbers: Telephone: +27 (0) 11 237-1000
Facsimile: +27 (0) 11 314-5039
Email: ltd@mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 25/02/2011 12:00:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
