Wrap Text
Summarised unaudited financial results for the six months ended 31 December 2013
MUSTEK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST
ISIN: ZAE000012373
(“Mustek” or “the Group”)
Summarised unaudited financial results for the six months ended 31 December 2013
- Gross profit % from continuing operations up from 13,2% to 14,1%
- Headline earnings per ordinary share up 33%
- Net asset value of 785 cents per share
Summarised consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 31 Dec 30 Jun
2013 2012 2013
R000 R000 R000
Continuing operations
Revenue 1 978 329 1 806 727 4 072 274
Cost of sales (1 699 363) (1 569 033) (3 517 496)
Gross profit 278 966 237 694 554 778
Other income 2 469 2 037 4 489
Foreign currency profits (losses) 1 213 (14 964) (50 521)
Distribution, administrative and other operating expenses (191 511) (174 291) (371 497)
Profit from operations 91 137 50 476 137 249
Investment revenues 2 187 2 280 4 384
Finance costs (24 800) (12 954) (38 196)
Other (losses) gains (739) - 12 012
Share of profit of associates 1 906 2 674 4 290
Profit before tax 69 691 42 476 119 739
Income tax expense (20 371) (10 738) (37 847)
Profit for the period from continuing operations 49 320 31 738 81 892
Discontinued operations
(Loss) profit for the period from discontinued operations (8 073) 1 773 (661)
Profit for the period 41 247 33 511 81 231
Other comprehensive income
Exchange profits on translation of foreign operations 2 109 1 605 6 553
Other comprehensive income for the period, net of tax 2 109 1 605 6 553
Total comprehensive income for the period 43 356 35 116 87 784
Profit (loss) attributable to:
Owners of the parent 44 779 34 158 85 049
Non-controlling interest (3 532) (647) (3 818)
41 247 33 511 81 231
Total comprehensive income attributable to:
Owners of the parent 46 773 35 032 90 255
Non-controlling interest (3 417) 84 (2 471)
43 356 35 116 87 784
Earnings and dividend per share (cents)
Weighted number of ordinary shares in issue 108 433 165 108 436 464 108 436 464
Ordinary shares in issue 108 433 165 108 433 165 108 433 165
Dividend per ordinary share 20,00 17,00 17,00
From continuing and discontinued operations
Headline earnings per ordinary share 42,15 31,75 72,85
Basic earnings per ordinary share 41,30 31,50 78,43
From continuing operations
Headline earnings per ordinary share 46,34 29,52 71,50
Basic earnings per ordinary share 45,48 29,27 77,08
From discontinued operations
Headline (loss) earnings per ordinary share (4,19) 2,23 1,35
Basic (loss) earnings per ordinary share (4,19) 2,23 1,35
Reconciliation between basic and headline earnings
Basic earnings attributable to owners of the parent 44 779 34 158 85 049
Group’s share of after tax profit on sale of shares
in joint venture - - (8 247)
Group’s share of loss on disposal of property, plant and equipment 191 274 437
Impairment of distribution right - - 3 445
Non-controlling interest in impairment of distribution right - - (1 688)
Loss on sale of investment 739 - -
Headline earnings from continuing and discontinued operations 45 709 34 432 78 996
Less Group’s share of loss (profit) for the period from
discontinued operations 4 541 (2 420) (1 469)
Headline earnings from continuing operations 50 250 32 012 77 527
Basic earnings attributable to owners of the parent 44 779 34 158 85 049
Less Group’s share of loss (profit) for the period from
discontinued operations 4 541 (2 420) (1 469)
Basic earnings from continuing operations 49 320 31 738 83 580
Net asset value per share (cents) 785,30 712,07 762,10
Summarised consolidated statement of financial position
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 31 Dec 30 Jun
2013 2012 2013
R000 R000 R000
ASSETS
Non-current assets
Property, plant and equipment 130 018 119 702 120 462
Intangible assets 58 203 60 656 57 489
Investments in associates 12 850 6 262 7 795
Other investments and loans 24 415 31 770 31 455
Deferred tax asset 16 141 14 333 17 487
241 627 232 723 234 688
Current assets
Inventories 818 387 761 057 688 851
Inventories in transit 84 486 82 806 101 681
Trade and other receivables 774 525 709 823 679 114
Foreign currency assets 4 311 - 8 825
Tax assets 12 727 11 018 -
Bank balances and cash 238 506 95 847 455 572
1 932 942 1 660 551 1 934 043
Assets classified as held for sale 68 277 307 719 64 588
TOTAL ASSETS 2 242 846 2 200 993 2 233 319
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 117 916 868 117 916
Ordinary share premium - 117 048 -
Retained earnings 729 310 655 379 706 140
Non-distributable reserve 809 809 809
Foreign currency translation reserve 3 494 (1 983) 1 500
Equity attributable to owners of the parent 851 529 772 121 826 365
Non-controlling interest 9 129 18 510 12 546
Total equity 860 658 790 631 838 911
Non-current liabilities
Long-term borrowings 7 736 6 670 6 837
Deferred tax liabilities 4 095 2 320 2 324
11 831 8 990 9 161
Current liabilities
Short-term borrowings 12 287 047 181
Trade and other payables 939 166 783 208 1 095 091
Foreign currency liabilities 6 8 206 3 223
Deferred income 31 748 29 116 34 616
Tax liabilities 14 045 4 446 8 653
Bank overdrafts 351 324 58 995 216 589
1 336 301 1 171 018 1 358 353
Liabilities directly associated with assets classified as
held for sale 34 056 230 354 26 894
Total liabilities 1 382 188 1 410 362 1 394 408
TOTAL EQUITY AND LIABILITIES 2 242 846 2 200 993 2 233 319
Summarised consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 31 Dec 30 Jun
2013 2012 2013
R000 R000 R000
Operating activities
Cash receipts from customers 1 914 439 2 025 874 4 642 832
Cash paid to suppliers and employees (2 174 074) (2 300 666) (4 405 388)
Net cash (used in) from operations (259 635) (274 792) 237 444
Investment revenues received 2 308 2 921 5 529
Finance costs paid (25 780) (16 667) (46 072)
Dividends paid (21 610) (18 434) (18 434)
Income taxes paid (24 610) (19 555) (32 954)
Net cash (used in) from operating activities (329 327) (326 527) 145 513
Net cash (used in) from investing activities (21 043) (2 360) 895
Net cash from financing activities 135 653 199 119 51 795
Net (decrease) increase in cash and cash equivalents (214 717) (129 768) 198 203
Cash and cash equivalents at beginning of the period 466 600 268 397 268 397
Cash and cash equivalents at the end of the period 251 883 138 629 466 600
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
R000 R000 R000 R000 R000 R000 R000 R000
Balance at 30 June 2012 868 117 257 639 655 809 (2 857) 755 732 18 426 774 158
Net profit for the period - - 34 158 - - 34 158 (647) 33 511
Other comprehensive income - - - - 874 874 731 1 605
Dividends paid - - (18 434) - - (18 434) - (18 434)
Buy back of shares - (209) - - - (209) - (209)
Balance at 31 December 2012 868 117 048 655 379 809 (1 983) 772 121 18 510 790 631
Net profit for the period - - 50 891 - - 50 891 (3 171) 47 720
Other comprehensive income - - - - 4 332 4 332 616 4 948
Disposal of joint venture - - (130) - (849) (979) (3 409) (4 388)
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
Net profit for the period - - 44 779 - - 44 779 (3 532) 41 247
Other comprehensive income - - - - 1 994 1 994 115 2 109
Dividends paid - - (21 610) - - (21 610) - (21 610)
Balance at 31 December 2013 117 916 - 729 309 809 3 494 851 528 9 129 860 657
Summarised segment analysis
Total Mustek Rectron
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2013 2012 2013 2012 2013 2012
Business segments R000 R000 R000 R000 R000 R000
Revenue 1 978 329 1 806 727 1 303 952 1 095 439 877 908 827 645
EBITDA* 100 612 59 213 74 097 39 339 33 236 27 457
Depreciation and amortisation (9 475) (8 737) (6 328) (5 548) (3 147) (3 189)
Profit (loss) from operations 91 137 50 476 67 769 33 791 30 089 24 268
Investment revenues 2 187 2 280 4 014 3 224 735 1 530
Finance costs (24 800) (12 954) (16 438) (7 516) (8 362) (5 438)
Other losses (739) - - - -
Share of profit of associates 1 906 2 674 - - - -
Profit (loss) before tax 69 691 42 476 55 345 29 499 22 462 20 360
Income tax (expense) benefit (20 371) (10 738) (16 228) (7 861) (5 971) (5 693)
Profit (loss) for the period
from continuing operations 49 320 31 738 39 117 21 638 16 491 14 667
Discontinued operations
(Loss) profit for the period
from discontinued operations (8 073) 1 773 - - (8 073) (413)
Profit (loss) for the period 41 247 33 511 39 117 21 638 8 418 14 254
Attributable to:
Owners of the parent 44 779 34 158 39 117 21 638 11 950 14 460
Non-controlling interest (3 532) (647) - - (3 532) (206)
41 247 33 511 39 117 21 638 8 418 14 254
*Earnings before interest, taxation, depreciation and amortisation.
Summarised segment analysis (continued)
Comztek Group Eliminations
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2013 2012 2013 2012 2013 2012
Business segments R000 R000 R000 R000 R000 R000
Revenue - - - - (203 531) (116 357)
EBITDA* - - (6 721) (7 583) - -
Depreciation and amortisation - - - - - -
Profit (loss) from operations - - (6 721) (7 583) - -
Investment revenues - - 319 427 (2 881) (2 901)
Finance costs - - (2 881) (2 901) 2 881 2 901
Other losses - (739) -
Share of profit of associates - - 1 906 2 674 - -
Profit (loss) before tax - - (8 116) (7 383) - -
Income tax (expense) benefit - - 1 828 2 816 - -
Profit (loss) for the period
from continuing operations - - (6 288) (4 567) - -
Discontinued operations
(Loss) profit for the period
from discontinued operations - 2 186 - - - -
Profit (loss) for the period - 2 186 (6 288) (4 567) - -
Attributable to:
Owners of the parent - 2 627 (6 288) (4 567) - -
Non-controlling interest - (441) - - - -
- 2 186 (6 288) (4 567) - -
*Earnings before interest, taxation, depreciation and amortisation.
Geographical segments
Total South Africa Mustek East Africa
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
2013 2012 2013 2012 2013 2012
R000 R000 R000 R000 R000 R000
Revenue 1 978 329 1 806 727 1 945 354 1 784 133 32 975 22 594
Profit (loss) before tax 69 691 42 476 69 447 42 763 244 (287)
Income tax (expense) benefit (20 371) (10 738) (20 010) (10 958) (361) 220
Profit (loss) for the period
from continuing operations 49 320 31 738 49 437 31 805 (117) (67)
Discontinued operations
(Loss) profit for the period
from discontinued operations (8 073) 1 773 - (194) - -
Profit (loss) for the period 41 247 33 511 49 437 31 611 (117) (67)
Attributable to:
Owners of the parent 44 779 34 158 49 437 31 955 (117) (67)
Non-controlling interest (3 532) (647) - (344) - -
41 247 33 511 49 437 31 611 (117) (67)
Geographical segments (continued)
Rectron Australia Comztek Africa
Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2013 2012 2013 2012
R000 R000 R000 R000
Revenue - - - -
Profit (loss) before tax - - - -
Income tax (expense) benefit - - - -
Profit (loss) for the period
from continuing operations - - - -
Discontinued operations
(Loss) profit for the period
from discontinued operations (8 073) (413) - 2 380
Profit (loss) for the period (8 073) (413) - 2 380
Attributable to:
Owners of the parent (4 541) (207) - 2 477
Non-controlling interest (3 532) (206) - (97)
(8 073) (413) - 2 380
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 summarised unaudited financial results for the period ended 31 December 2013 have 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
summarised financial results, 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 2013.
Audit report
Neither the consolidated financial results for the six months ended 31 December 2013, nor this set of summarised
financial information has been audited by the Group’s auditors, and thus no audit report was issued.
The directors take full responsibility for the preparation of this summarised report. Any reference to future
financial performance included in this announcement has not been reviewed or reported on by the company’s auditors.
Discontinued operations
Rectron Australia BV is still classified as a discontinued operation after it was classified as a discontinued
operation in the comparative period together with Comztek Holdings Proprietary Limited and vacant land in KwaZulu-Natal.
The (loss) profit for the period from discontinued operations is as follows:
31 Dec 2013 31 Dec 2012
Revenue 30 926 373 343
Cost of sales (30 955) (327 334)
Gross (loss) profit (29) 46 009
Foreign currency (losses) profits (407) 2 350
Distribution, administrative and other operating expenses (9 805) (40 011)
(Loss) profit from operations (10 241) 8 348
Investment revenue 120 641
Finance cost (980) (3 713)
(Loss) profit before tax (11 101) 5 276
Income tax expense 3 028 (3 503)
(Loss) profit for the period (8 073) 1 773
Plus loss attributable to outside shareholders 3 532 647
Group’s share of (loss) profit for the period from discontinued operations (4 541) 2 420
Operating results
The Group is pleased to announce that the gross profit percentage from continuing operations increased from 13,2% to
14,1% after a declining trend in recent years. Revenue from continuing operations improved by 9,5% to R1,978 billion (31
December 2012: R1,807 billion). The revenue growth was supported mainly by the growth in the Acer, Lenovo and Asus
product ranges.
The Group is also starting to see some success in its Huawei Enterprise Solutions, Security and Green Energy products
and expects growing contributions to both revenue and profit going forward.
During the year, the Group applied hedge accounting and separated the interest and spot elements of their forward
contracts, resulting in R7,0 million being classified as finance costs as opposed to forex losses.
Other (losses) gains of R0,7 million (31 December 2012: Rnil) consists of a loss on the sale of 10% of its investment
in Zinox Technologies Limited, a company incorporated in Nigeria.
The contribution from our associates decreased slightly after an unexpected once-off write-off in excess of R3,0
million in one of the associated companies.
Focus on optimal working capital management continues. Inventory build-up in anticipation of an improved order book in
the next quarter, as well as higher exchange rates, boosted the value of inventory holdings.
Mustek’s headline earnings from continuing and discontinued operations is 32,8% higher at 42,15 cents per share (31
December 2012: 31,75 cents per share) and basic earnings is 31,1% higher at 41,30 cents per share (31 December 2012: 31,50
cents per share).
Cash flow
Inventory and receivables increased in line with historic trends while revenue growth and the weaker Rand also
contributed to the R259,6 million cash used in operations (31 December 2011: R274,8 million). This was funded by bank overdraft
facilities and is expected to reverse in the period through to June 2014, in line with historic trends.
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 period under review.
Corporate activities
On 13 December 2013, Mustek announced that it has signed agreements to acquire a 26% stake in Sizwe Africa IT Group
Proprietary Limited (“Sizwe”), a provider of ICT products, network products and solutions and information technology
maintenance and support services for a total cash consideration of R15 166 666,45, subject to the necessary regulatory
approvals. Mustek will also advance a loan of R6 666 667 to Zaloserve Proprietary Limited, the ultimate holding company
of Sizwe and a loan of R7 966 666,55 to Omni Capital Proprietary Limited on the effective date.
All the necessary applications have been lodged and shareholders will be kept up to date with the progress made.
On 9 July 2013, the Group disposed of a portion of its investment in Zinox Technologies Limited for a cash
consideration of USD850 000. The Group will retain a 20% investment in Zinox.
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 Group’s 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.
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 that was not
energy-efficient with energy-efficient units and by installing hundreds of rooftop solar panels. This installation will pay for
itself in a few 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 children’s needs - in particular their education - but also supports charities, sporting events and
community facilities.
For more than 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 “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.
Considering vertical sector potential in 2014, significant growth opportunities lie in the education, health and
security industries, as well as the solar energy space.
For some time, sceptics have argued that the PC will be replaced with newer devices such as the tablet. Mustek was
initially excluded from this growth opportunity, but as some of the brands distributed by the Group started catching up,
Mustek is becoming a key player in the local tablet market. Over the next few years, this is likely to be a positive
revenue driver.
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.
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.
Post balance sheet events
There have been no significant events subsequent to period end up until the date of this report that require adjustment
or disclosure.
On behalf of the board of directors
David Kan Neels Coetzee 20 February 2014
Chief Executive Officer Financial Director
(preparer of summarised Group results)
Corporate information: www.mustek.co.za Company secretary: Sirkien van Schalkwyk
Transfer secretaries: Computershare Investor Services (Proprietary) 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 (Proprietary) Ltd
Date: 20/02/2014 08:37:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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