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Provisional audited financial results for the year ended 30 June 2013
Mustek Limited
(Incorporated in the Republic of South Africa) (Registration number 1987/070161/06)
Share code: MST ISIN: ZAE000012373 (Mustek or the Group)
Provisional audited financial results for the year ended 30 June 2013
Revenue from continuing operations up 16%
2013 R4,072 billion
2012 R3,503 billion
Cash from operations up 226%
2013 R145,5 million
2012 R 44,6 million
Dividend per share up 18%
2013 20 cents
2012 17 cents
Net asset value per share up 9%
2013 762 cents
2012 697 cents
Summarised consolidated statement of comprehensive income
2013 2012
R 000 R 000
Continuing operations
Revenue 4 072 274 3 502 543
Cost of sales (3 517 496) (3 002 190)
Gross profit 554 778 500 353
Other income 4 489 17 980
Foreign currency losses (50 521) (47 813)
Distribution, administrative and other operating expenses (371 497) (333 591)
Profit from operations 137 249 136 929
Investment revenues 4 384 4 668
Finance costs (38 196) (25 337)
Other gains (losses) 12 012 (5 613)
Share of profit of associates 4 290 1 686
Profit before tax 119 739 112 333
Income tax expense (37 847) (32 515)
Profit for the year from continuing operations 81 892 79 818
Discontinued operations
Loss for the year from discontinued operations (661) (2 019)
Profit for the year 81 231 77 799
Other comprehensive income
Exchange profits on translation of foreign operations 6 553 7 883
Other comprehensive income for the year, net of tax 6 553 7 883
Total comprehensive income for the year 87 784 85 682
Profit attributable to:
Owners of the parent 85 049 80 181
Non-controlling interest (3 818) (2 382)
81 231 77 799
Total comprehensive income attributable to:
Owners of the parent 90 255 86 196
Non-controlling interest (2 471) (514)
87 784 85 682
Earnings and dividend per share (cents)
Weighted number of ordinary shares in issue 108 436 464 108 831 677
Ordinary shares in issue 108 433 165 108 469 165
Dividend per ordinary share - paid 17,00 17,00
Dividend per ordinary share - proposed 20,00 17,00
From continuing and discontinued operations
Headline earnings per ordinary share 72,85 70,15
Basic earnings per ordinary share 78,43 73,67
From continuing operations
Headline earnings per ordinary share 71,50 71,37
Basic earnings per ordinary share 77,08 74,89
From discontinuing operations
Headline earnings per ordinary share 1,35 (1,22)
Basic earnings per ordinary share 1,35 (1,22)
Reconciliation between basic and headline earnings
Basic earnings attributable to owners of the parent 85 049 80 181
Groups share of after tax profit on sale of shares in joint venture (8 247) -
Groups share of loss (profit) on disposal of property, plant and equipment 437 (7 762)
Impairment of distribution right 3 445 3 445
Non-controlling interest in impairment of distribution right (1 688) (1 688)
Impairment of associate and other loans - 2 168
Headline earnings from continuing and discontinued operations 78 996 76 344
Less Groups share of (profit) loss for the year from discontinued operations (1 469) 1 325
Headline earnings from continuing operations 77 527 77 669
Basic earnings attributable to owners of the parent 85 049 80 181
Less Groups share of loss (profit) for the year from discontinued operations (1 469) 1 325
Basic earnings from continuing operations 83 580 81 506
Net asset value per share (cents) 762,10 696,73
Summarised consolidated statement of financial position
2013 2012
R 000 R 000
ASSETS
Non-current assets
Property, plant and equipment 120 462 122 625
Intangible assets 57 489 60 240
Investments in associates 7 795 8 737
Other investments and loans 31 455 31 733
Deferred tax asset 17 487 15 666
234 688 239 001
Current assets
Inventories 688 851 673 009
Inventories in transit 101 681 100 610
Trade and other receivables 679 114 596 447
Foreign currency assets 8 825 14 389
Tax assets - 666
Bank balances and cash 455 572 224 413
1 934 043 1 609 534
Assets classified as held for sale 64 588 268 664
TOTAL ASSETS 2 233 319 2 117 199
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 117 916 868
Ordinary share premium - 117 257
Retained earnings 706 140 639 655
Non-distributable reserve 809 809
Foreign currency translation reserve 1 500 (2 857)
Equity attributable to owners of the parent 826 365 755 732
Non-controlling interest 12 546 18 426
Total equity 838 911 774 158
Non-current liabilities
Long-term borrowings 6 837 4 712
Deferred tax liabilities 2 324 2 409
9 161 7 121
Current liabilities
Short-term borrowings 181 143 160
Trade and other payables 1 095 091 943 848
Foreign currency liabilities 3 223 2 585
Deferred income 34 616 28 078
Tax liabilities 8 653 3 963
Bank overdrafts 216 589 20 055
1 358 353 1 141 689
Liabilities directly associated with assets
classified as held for sale 26 894 194 231
Total liabilities 1 394 408 1 343 041
TOTAL EQUITY AND LIABILITIES 2 233 319 2 117 199
Summarised consolidated cash flow statement
2013 2012
R 000 R 000
Operating activities
Cash receipts from customers 4 642 832 3 983 731
Cash paid to suppliers and employees (4 405 388) (3 863 800)
Net cash from operations 237 444 119 931
Investment revenues received 5 529 5 591
Finance costs paid (46 072) (34 241)
Dividends received - 788
Dividends paid (18 434) (18 623)
Income taxes paid (32 954) (28 844)
Net cash from operating activities 145 513 44 602
Net cash from (used in) investing activities 895 (37 188)
Net cash from financing activities 51 795 65 196
Net increase in cash and cash equivalents 198 203 72 610
Cash and cash equivalents at beginning of the year 268 397 195 787
Cash and cash equivalents at end of the year 466 600 268 397
Summarised consolidated statement of changes in equity
Foreign
Ordinary Ordinary Non- currency Attributable Non-
share share Retained distributable translation to owners of controlling
capital premium earnings reserve reserve the parent interest Total
R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Balance at 30 June 2011 877 122 823 576 181 2 725 (8 872) 693 734 18 940 712 674
Net profit for the year - - 80 181 - - 80 181 (2 382) 77 799
Other comprehensive income - - - - 6 015 6 015 1 868 7 883
Realisation of non-distributable
reserve on disposal of fixed assets - - 1 916 (1 916) - - - -
Recognition of share-based payments - 53 - - - 53 - 53
Dividends paid - - (18 623 - - (18 623) - (18 623)
Buy back of shares (9) (5 619) - - - (5 628) - (5 628)
Balance at 30 June 2012 868 117 257 639 655 809 (2 857) 755 732 18 426 774 158
Net profit for the year - - 85 049 - - 85 049 (3 818) 81 231
Other comprehensive income - - - - 5 206 5 206 1 347 6 553
Disposal of joint venture - - (130) - (849) (979) (3 409) (4 388)
Dividends paid - - (18 434) - - (18 434) - (18 434)
Buy back of shares - (209) - - - (209) - (209)
Transfer to no par value
share capital 117 048 (117 048) - - - - - -
Balance at 30 June 2013 117 916 - 706 140 809 1 500 826 365 12 546 838 911
Summarised segment analysis
Total Mustek Rectron Comztek Group Eliminations
Business segments 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Revenue 4 072 274 3 502 543 2 632 306 2 317 393 1 754 816 1 401 274 - - - - (314 848) (216 124)
EBITDA* 155 125 155 830 111 214 128 734 59 084 40 440 - - (15 173) (13 344) - -
Depreciation and amortisation (17 876) (18 901) (11 462) (11 335) (6 414) (7 566) - - - - - -
Profit (loss) from operations 137 249 136 929 99 752 117 399 52 670 32 874 - - (15 173) (13 344) - -
Investment revenues 4 384 4 668 6 808 8 899 2 606 1 706 - - 705 835 (5 735) (6 772)
Finance costs (38 196) (25 337) (22 738) (13 205) (15 458) (12 132) - - (5 735) (6 772) 5 735 6 772
Other gains (losses) 12 012 (5 613) - (3 445) - - - - 12 012 (2 168) - -
Share of profit of associates 4 290 1 686 - - - - - - 4 290 1 686 - -
Profit (loss) before tax 119 739 112 333 83 822 109 648 39 818 22 448 - - (3 901) (19 763) - -
Income tax (expense) benefit (37 847) (32 515) (24 349) (33 665) (11 900) (4 249) - - (1 553) 5 399 - -
Profit (loss) for the year
from continuing operations 81 892 79 818 59 428 75 983 27 918 18 199 - - (5 454) (14 364) - -
Discontinued operations
(Loss) profit for the year
from discontinued operations (661) (2 019) - - (3 786) (1 392) 3 125 (627) - - - -
Profit (loss) for the year 81 231 77 799 59 428 75 983 24 132 16 807 3 125 (627) (5 454) (14 364) - -
Attributable to:
Owners of the parent 85 049 80 181 59 428 75 983 25 993 17 590 3 394 (716) (3 766) (12 676) - -
Non-controlling interest (3 818) (2 382) - - (1 861) (783) (269) 89 (1 688) (1 688) - -
81 231 77 799 59 428 75 983 24 132 16 807 3 125 (627) (5 454) (14 364) - -
*Earnings before interest, taxation, depreciation and amortisation.
Total South Africa Mustek East Africa Rectron Australia Comztek Africa
Geographical segments 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Revenue 4 072 274 3 502 543 4 019 361 3 458 745 52 913 43 798 - - - -
Profit before tax 119 739 112 333 118 397 110 193 1 342 2 140 - - - -
Income tax expense (37 847) (32 515) (37 580) (31 833) (267) (682) - - - -
Profit for the year from
continuing operations 81 892 79 818 80 817 78 360 1 075 1 458 - - - -
Discontinued operations
(Loss) profit for the year
from discontinued operations (661) (2 019) (722) (2 651) - - (3 786) (1 392) 3 847 2 024
Profit (loss) for the year 81 231 77 799 80 095 75 709 1 075 1 458 (3 786) (1 392) 3 847 2 024
Attributable to:
Owners of the parent 85 049 80 181 81 984 77 469 1 075 1 458 (1 925) (609) 3 915 1 863
Non-controlling interest (3 818) (2 382) (1 889) (1 760) - - (1 861) (783) (68) 161
81 231 77 799 80 095 75 709 1 075 1 458 (3 786) (1 392) 3 847 2 024
Commentary
Corporate information
Mustek is a limited liability company incorporated and domiciled in South Africa. The main business of Mustek, its
subsidiaries, joint ventures and associates is the assembling, marketing and distribution of ICT (Information Communication
Technology) products and services.
Basis of preparation
The provisional audited financial information for the year ended 30 June 2013 has been prepared in accordance with the
framework concepts and measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the SAICA Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Counsel, the information as required by IAS 34: Interim Financial Reporting,
the Listings Requirements of the JSE Limited and the requirements of the Companies Act of South Africa. The audited
financial statements and this set of abridged financial information, which are based on reasonable judgements and estimates,
have been prepared using accounting policies that comply with IFRS. These are consistent with those applied in the
annual financial statements for the year ended 30 June 2012.
Auditors opinion
The independent auditors, Deloitte & Touche, have issued their unmodified opinion on the Groups financial statements
and this set of provisional financial information for the year ended 30 June 2013. The audit was conducted in accordance
with International Standards on Auditing. The directors take full responsibility for the preparation of this
provisional report and the financial information has been derived from the Group financial statements and are consistent in all
material aspects with the Group financial statements. Their unmodified audit report, their unmodified audit report for
this set of provisional financial information and the annual financial statements are available for inspection at the
companys registered office. Any reference to future financial performance included in this announcement has not been
reviewed or reported on by the companys auditors.
Discontinued operations
The Group disposed of land in KwaZulu-Natal and its stake in Comztek Holdings Proprietary Limited (Comztek). Rectron
Australia BV is still classified as a discontinued operation.
The profit (loss) for the year from discontinued operations is as follows:
2013 2012
Revenue 665 030 640 479
Cost of sales (583 671) (559 916)
Gross profit 81 359 80 563
Other income 45 1 847
Foreign currency losses (1 580) (824)
Distribution, administrative and other operating expenses (71 537) (77 442)
Profit from operations 8 287 4 144
Investment revenues 1 145 1 711
Finance costs (7 876) (8 905)
Profit (loss) before tax 1 556 (3 050)
Income tax (expense) benefit (2 217) 1 031
Loss for the year (661) (2 019)
Less loss attributable to outside shareholders 2 130 694
Groups share of profit (loss) for the year from discontinued operations 1 469 (1 325)
Operating results
Revenue from continuing operations increased by 16,3% to R4,072 billion (2012: R3,503 billion) and the gross profit
percentage decreased to 13,6% (2012: 14,3%). The addition of Acer and Lenovo to our product range over the past twelve
months assisted the revenue growth but negatively impacted margins as these products are typically sold at lower margins.
The Group expanded its basket of products with the introduction of multiple additions to the product portfolio
offering, including Huawei Enterprise Solutions and Miniflex range of fiber cables, as well as solar panels.
At 30 June 2012 the Rand traded at R8,19 against the USD and weakened to R9,96 at 30 June 2013. This represents a
21,6% devaluation and as an importer, Mustek will incur forex losses when the Rand weakens against the USD. During the year
Mustek changed its policy to cover two thirds of its USD exposure and as a result, managed to contain the forex losses
to R50,5 million (2012: R47,8 million).
As a result, Musteks headline earnings from continuing and discontinued operations is 3,9% higher at 72,85 cents per
share (2012: 70,15 cents per share) and basic earnings is 6,5% higher at 78,43 cents per share (2012: 73,67 cents per
share).
Other gains (losses) of R12,0 million (2012: R5,6 million loss) consists of a pre tax profit of R15,4 million on the
sale of Comztek and a R3,4 million impairment of distribution rights. The previous years loss consists of a R2,2 million
impairment of an associate loan and a R3,4 million impairment of distribution rights.
The improved contribution from our associates arose from higher levels of activity and continued growth. Focus on
optimal working capital management continues and inventory days reduced to 71,5 days (2012: 81,8 days).
During the year, the Group applied hedge accounting and separated the interest and spot elements of their forward
contracts, resulting in R8,2 million being classified as finance costs as opposed to forex losses.
The transition in the CEO leadership with the appointment of Ms Lindi Shortt at subsidiary Rectron proceeds apace,
with increased revenues of 25% from continuing operations. Rectron has also regained the historical profitability levels
previously earned, and is positioned to deliver on its continued recovery.
Cash flow
Cash generated from operating activities of R145,5 million (2011: R44,6 million) was higher due to inventory and
receivables increasing at a significantly lower rate than accounts payable. Cash generated from the drive to improve working
capital management further will be used to reduce short-term borrowings.
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.
Board of directors
No changes were made to the board during the year under review. Total remuneration paid to directors for the year
under review amounted to R9,5 million (2012: R7,5 million) and share-based payments of R0,5 million (2012: R1,7 million)
were expensed relating to directors.
Corporate activities
Mustek acquired a further 10% of Khauleza IT Solutions Proprietary Limited with effect from 1 July 2012 for a nominal
amount.
On 31 May 2013, the Group disposed of its 41,84% stake in Comztek for a total consideration of R39,4 million through a
combination of cash and Datatec shares. Comztek also declared a dividend prior to completion which effectively
increased Musteks consideration to R44,4 million.
Retirement benefit plan
The Mustek Group Retirement Fund is a defined contribution fund and payments to the plan are expensed as they fall
due. The majority of the Groups employees belong to this fund. The Group does not provide additional post-retirement
benefits.
Environmental, social and governance aspects
The Group subscribes to and complies in all material aspects with the Code on Corporate Governance Practices and
Conduct as contained in the King III Report on Corporate Governance.
Mustek is committed to transparent and integrated reporting in the spirit of King III and the Global Reporting
Initiative (GRI). We are accordingly updating corporate governance practices where necessary and are enhancing our internal
information gathering systems to provide the quality and type of information required for authentically integrated annual
reports. The 2013 Integrated Report will be posted to shareholders in due course.
The board appointed Neels Coetzee, the Group Financial Director, as Stakeholder Relations Officer.
Initiatives include the reduction in energy consumption after a target to reduce energy consumption by 20% was set in
2011. This target was reached through ongoing staff awareness programmes, the replacement of ICT equipment with
energy-efficient units and by installing hundreds of rooftop solar panels. This installation will pay for itself in a few short
years and will not only significantly reduce our overall electricity footprint, it will also demonstrate the viability
of renewable energy for powering corporate infrastructure.
Mustek has a consistent record in community support and corporate social investment (CSI). The Group focuses our CSI
efforts on childrens needs - in particular their education - but also supports charities, sporting events and
community facilities.
For a decade, we have conducted a comprehensive HIV/AIDS strategy and programme that also provides antiretroviral
drugs to HIV-positive staff.
Mustek has further maintained its ISO 14001 certification since 2004 and has received no fines or sanctions for
non-compliance with environmental laws and regulations.
Industry outlook
There is ongoing industry debate around the future of the desktop. Our view, premised on our ongoing interactions
with our customers and this rapidly changing industry, is that the desktop will continue to transition into different
formats based on evolving market trends and customer requirements. A manifestation of this is the increasing uptake of the
All-in-One format, proving popular in the banking and public sector markets due to its lower Total Cost of Ownership
and security benefits for the large percentage of desk bound employees in these environments.
We are also continuing with our research and development into new product offerings that has both potential markets
and growth into the foreseeable future.
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.
For some time, sceptics have argued that the PC will be replaced with newer devices such as the tablet (mobile
device). Apple dominates this form factor and Mustek was excluded from this growth opportunity. However, statistics indicate
that the other brands are catching up and Apple is steadily losing its tablet dominance. We believe that Mustek will
become a key player in the local tablet market for the other brands. Over the next few years, this is likely to be a positive
revenue driver.
It became even more apparent that the use of tablets will play an increasing role in education in the future. Mustek
undertook considerable research into the merits of these particular devices, but also how these tools can best be used in
the classroom.
We recently launched a Cloud offering for the channel that includes a micro-billing system to support the transition
from a transactional sale to an annuity model.
We have also experienced another year of strengthening our strategic partner network within the industry.
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.
Musteks continued commitment to optimal cash utilisation will mean that cash generated by the operations will be used
to fund growth and reduce debt. To this end, the final dividend declared by the board of directors for the financial
year ended 30 June 2013 has been increased to 20 cents (2012: 17 cents) per share.
Notice is hereby given that a final gross dividend of 20 cents per ordinary share for the year ended 30 June 2013 is
declared, payable to shareholders recorded in the books of the company at the close of business on the record date appearing
below.This dividend is declared out of income reserves. The company's income tax reference number is 9550081716 and has
108 433 165 ordinary shares in issue and ranking for dividend at the date of this declaration. The South African dividend
tax rate is 15% and no Secondary Tax on Companies credits have been utilised, resulting in a net dividend of 17 cents per share
to shareholders who are not exempt.
The salient dates applicable to the final dividend are as follows:
Last day of trade cum dividend Friday, 27 September 2013
First day to trade ex dividend Monday, 30 September 2013
Record date Friday, 4 October 2013
Payment date Monday, 7 October 2013
No share certificates may be dematerialised or rematerialised between Monday, 30 September 2013 and Friday, 4 October
2013, both days inclusive.
Where applicable, payment in respect of certificated shareholders will be transferred electronically to shareholders
bank accounts on the payment date. In the absence of specific mandates, payment cheques will be posted to certificated
shareholders at their risk on the payment date. Shareholders who have dematerialised their shares will have their
accounts at their Central Securities Depository Participant or broker credited on the payment date.
Annual general meeting
The notice of the annual general meeting will be included in the Integrated Report that will be posted to shareholders
in due course.
Post balance sheet events
On 9 July 2013, Zinox Technologies Limited (Zinox) disposed of its investments in Task Systems Limited and
Technology Distributions Limited in exchange for Zinox shares. As part of the transaction, the Group disposed of a portion
of its investment in Zinox for a cash consideration of USD850 000. The Group will retain a 20% investment in Zinox.
On 31 July 2013, the Group acquired vacant land in Midrand for an amount of R9,6 million.
There have been no other significant events subsequent to year end up until the date of this report that require
adjustment to or disclosure in these annual financial statements.
On behalf of the board of directors
David Kan Chief Executive Officer Neels Coetzee Financial Director 28 August 2013
(preparer of provisional Group results) Midrand
CORPORATE INFORMATION:
Company secretary: Sirkien van Schalkwyk.
Transfer secretaries: Computershare Investor Services Proprietary Limited. 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 Proprietary Limited.
www.mustek.co.za
Date: 28/08/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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