Wrap Text
Summarised unaudited financial results for the six months ended 31 December 2014
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 2014
- Revenue up 25%
- Headline earnings per ordinary share up 26%
- Net asset value of 884 cents per share
Summarised consolidated statement of comprehensive income
Unaudited
Unaudited 6 months Audited
6 months 31 Dec Year-end
31 Dec 2013 30 Jun
2014 R000 2014
R000 (Re-presented) R000
REVENUE 2 502 606 2 009 256 4 764 123
Cost of sales (2 167 212) (1 730 318) (4 109 007)
GROSS PROFIT 335 394 278 938 655 116
Other income 4 559 2 469 10 006
Foreign currency (losses) profits (13 242) 806 (23 162)
Distribution, administrative and other operating expenses (232 764) (201 318) (460 501)
PROFIT FROM OPERATIONS 93 947 80 895 181 459
Investment revenues 7 540 2 308 6 388
Finance costs (31 371) (25 780) (50 513)
Other losses - (739) (739)
Share of profit of associates 5 923 1 906 6 988
PROFIT BEFORE TAX 76 039 58 590 143 583
Income tax expense (19 082) (17 343) (39 400)
PROFIT FOR THE PERIOD 56 957 41 247 104 183
OTHER COMPREHENSIVE INCOME
Exchange (losses) profits on translation of foreign operations (1 186) 2 109 3 228
Other comprehensive (losses) income for the period, net of tax (1 186) 2 109 3 228
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 55 771 43 356 107 411
PROFIT ATTRIBUTABLE TO:
Owners of the parent 56 698 44 779 107 334
Non-controlling interest 259 (3 532) (3 151)
56 957 41 247 104 183
TOTAL COMPREHENSIVEN INCOME ATTRIBUTABLE TO:
Owners of the parent 55 925 46 773 109 663
Non-controlling interest (154) (3 417) (2 252)
55 771 43 356 107 411
EARNINGS AND DIVIDENDS PER SHARE (CENTS)
Weighted number of ordinary shares in issue 106 875 829 108 433 165 107 255 590
Ordinary shares in issue 106 623 471 108 433 165 106 682 760
Dividend per ordinary share 28.00 20.00 20.00
Headline earnings per ordinary share 53.26 42.15 100.72
Basic earnings per ordinary share 53.05 41.30 100.07
RECONCILIATION BETWEEN BASIC AND HEADLINE EARNINGS (R000)
BASIC EARNINGS ATTRIBUTABLE TO OWNERS OF THE PARENT 56 698 44 779 107 334
Group's share of loss (profit) on disposal of property,
plant and equipment 219 191 (41)
Group's share of loss from disposal of investment - 739 739
Headline earnings 56 917 45 709 108 032
Net asset value per share (cents) 883.99 785.30 858.67
Summarised consolidated statement of financial position
Unaudited Unaudited Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2014 2013 2014
R000 R000 R000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 167 972 130 018 160 029
Intangible assets 61 726 58 203 60 032
Investments in associates 57 192 12 850 51 589
Other investments and loans 87 636 24 415 70 894
Deferred tax asset 23 931 16 141 29 164
398 457 241 627 371 708
CURRENT ASSETS
Inventories 1 021 930 818 387 1 036 984
Inventories in transit 243 655 84 486 232 895
Trade and other receivables 1 027 044 774 525 839 036
Foreign currency assets 11 252 4 311 839
Tax assets 21 979 12 727 16 555
Bank balances and cash 341 997 238 506 203 163
2 667 857 1 932 942 2 329 472
ASSETS CLASSIFIED AS HELD-FOR-SALE - 68 277 -
TOTAL ASSETS 3 066 314 2 242 846 2 701 180
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Ordinary stated capital 120 067 117 916 119 627
Retained earnings 818 614 729 309 791 787
Non-distributable reserve 809 809 809
Foreign currency translation reserve 3 056 3 494 3 829
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 942 546 851 528 916 052
NON-CONTROLLING INTEREST 18 307 9 129 18 461
TOTAL EQUITY 960 853 860 657 934 513
NON-CURRENT LIABILITIES
Long-term borrowings 34 587 7 736 34 788
Deferred tax liabilities 3 688 4 095 -
Deferred income 12 297 13 700 14 725
50 572 25 531 49 513
CURRENT LIABILITIES
Short-term borrowings 1 571 12 1 474
Trade and other payables 1 460 517 939 167 1 400 445
Foreign currency liabilities 366 6 2 452
Deferred income 25 396 18 048 35 470
Tax liabilities 1 083 14 045 7
Bank overdrafts 565 956 351 324 277 306
2 054 889 1 322 602 1 717 154
LIABILITIES DIRECTLY ASSOCIATED WITH ASSETS CLASSIFIED AS
HELD-FOR-SALE - 34 056 -
TOTAL LIABILITIES 2 105 461 1 382 189 1 766 667
TOTAL EQUITY AND LIABILITIES 3 066 314 2 242 846 2 701 180
Summarised consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2014 2013 2014
R000 R000 R000
OPERATING ACTIVITIES
Cash receipts from customers 2 314 598 1 914 439 4 616 623
Cash paid to suppliers and employees (2 357 604) (2 174 074) (4 690 776)
NET CASH USED IN OPERATIONS (43 006) (259 635) (74 153)
Investment revenues received 7 540 2 308 6 388
Finance costs paid (31 371) (25 780) (62 042)
Dividends paid (29 871) (21 610) (21 687)
Income taxes paid (14 768) (24 610) (76 229)
NET CASH USED IN OPERATING ACTIVITIES (111 476) (329 327) (227 723)
NET CASH USED IN INVESTING ACTIVITIES (36 248) (21 043) (104 621)
NET CASH FROM FINANCING ACTIVITIES 286 558 135 653 68 907
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 138 834 (214 717) (263 437)
Cash and cash equivalents at beginning of the period 203 163 466 600 466 600
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 341 997 251 883 203 163
Summarised consolidated statement of changes in equity
Foreign
Ordinary Non- currency Attributable Non-
stated Retained distributable translation to owners of controlling
capital earnings reserve reserve the parent interest Total
R000 R000 R000 R000 R000 R000 R000
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
Net profit for the period - 62 478 - - 62 478 381 62 859
Other comprehensive income - - - 335 335 784 1 119
Acquisition of new subsidiary - - - - - 8 167 8 167
Buy back of shares (36 327) - - - (36 327) - (36 327)
Share capital issued 38 038 - - - 38 038 - 38 038
BALANCE AT 30 JUNE 2014 119 627 791 787 809 3 829 916 052 18 461 934 513
Net profit for the period - 56 698 - - 56 698 259 56 957
Other comprehensive income - - - (773) (773) (413) (1 186)
Dividends paid - (29 871) - - (29 871) - (29 871)
Buy back of shares (15 778) - - - (15 778) - (15 778)
Share capital issued 16 218 - - - 16 218 - 16 218
BALANCE AT 31 DECEMBER 2014 120 067 818 614 809 3 056 942 546 18 307 960 853
Summarised segment analysis
BUSINESS SEGMENTS Total Mustek Rectron Group Eliminations
Unaudited Unaudited
Unaudited 6 months Unaudited Unaudited Unaudited 6 months Unaudited Unaudited Unaudited Unaudited
6 months 31 Dec 6 months 6 months 6 months 31 Dec 6 months 6 months 6 months 6 months
31 Dec 2013 31 Dec 31 Dec 31 Dec 2013 31 Dec 31 Dec 31 Dec 31 Dec
2014 R000 2014 2013 2014 R000 2014 2013 2014 2013
R000 (Re-presented) R000 R000 R000 (Re-presented) R000 R000 R000 R000
REVENUE 2 502 606 2 009 256 1 458 046 1 303 953 1 184 998 908 834 - - (140 438) (203 531)
EBITDA* 102 886 90 642 81 087 74 095 29 160 23 268 (7 361) (6 721) - -
Depreciation and amortisation (8 939) (9 747) (8 172) (6 327) (767) (3 420) - - - -
PROFIT (LOSS) FROM OPERATIONS 93 947 80 895 72 915 67 768 28 393 19 848 (7 361) (6 721) - -
Investment revenues 7 540 2 308 5 142 4 015 4 266 855 1 259 319 (3 127) (2 881)
Finance costs (31 371) (25 780) (15 671) (16 438) (15 700) (9 342) (3 127) (2 881) 3 127 2 881
Other losses - (739) - - - - - (739) - -
Share of profit of associates 5 923 1 906 - - - - 5 923 1 906 - -
PROFIT (LOSS) BEFORE TAX 76 039 58 590 62 386 55 345 16 959 11 361 (3 306) (8 116) - -
Income tax (expense) benefit (19 082) (17 343) (17 017) (16 228) (4 649) (2 943) 2 584 1 828 - -
PROFIT (LOSS) FOR THE PERIOD 56 957 41 247 45 369 39 117 12 310 8 418 (722) (6 288) - -
ATTRIBUTABLE TO:
Owners of the parent 56 698 44 779 43 823 39 117 13 597 11 950 (722) (6 288) - -
Non-controlling interest 259 (3 532) 1 546 - (1 287) (3 532) - - - -
56 957 41 247 45 369 39 117 12 310 8 418 (722) (6 288) - -
*Earnings before interest, taxation, depreciation and amortisation.
GEOGRAPHICAL SEGMENTS Total South Africa Mustek East Africa Rectron Australia
Unaudited Unaudited
Unaudited 6 months Unaudited Unaudited Unaudited Unaudited Unaudited 6 months
6 months 31 Dec 6 months 6 months 6 months 6 months 6 months 31 Dec
31 Dec 2013 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2013
2014 R000 2014 2013 2014 2013 2014 R000
R000 (Re-presented) R000 R000 R000 R000 R000 (Re-presented)
REVENUE 2 502 606 2 009 256 2 334 423 1 945 355 26 878 32 975 141 305 30 926
Profit (loss) before tax 76 039 58 590 79 648 69 447 54 244 (3 663) (11 101)
Income tax (expense) benefit (19 082) (17 343) (20 163) (20 010) (22) (361) 1 103 3 028
PROFIT (LOSS) FOR THE PERIOD 56 957 41 247 59 485 49 437 32 (117) (2 560) (8 073)
ATTRIBUTABLE TO:
Owners of the parent 56 698 44 779 57 939 49 437 32 (117) (1 273) (4 541)
Non-controlling interest 259 (3 532) 1 546 - - - (1 287) (3 532)
56 957 41 247 59 485 49 437 32 (117) (2 560) (8 073)
Commentary
Corporate information
Mustek is a limited liability company incorporated and domiciled in South Africa. The main business of Mustek, its
subsidiaries and associates is the assembling, marketing, distribution and servicing of ICT (information communication
technology) products and services.
Basis of preparation
The summarised unaudited financial results for the period ended 31 December 2014 have been prepared in accordance with
the framework concepts, and measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the South African Institute of Chartered Accounts (SAICA) Reporting Guides as issued by the Accounting Practices
Committee, the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the information
as required by IAS 34: Interim Financial Reporting, the Listings Requirements of the JSE Limited and the requirements of
the Companies Act, No 71 of 2008. This set of summarised financial information, which is based on reasonable judgements
and estimates, has been prepared using accounting policies that comply with IFRS. These are consistent with those
applied in the audited annual financial statements for the year ended 30 June 2014.
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 was classified as a discontinued operation on 31 December 2013. Towards the end of the previous
financial year, management took a decision not to dispose of the company. As a result, the comparative statement of
comprehensive income has been re-presented to include the results of Rectron Australia BV as part of continuing operations.
Operating results
The Group is pleased to report that revenue grew by 24.6% to R2.503 billion (31 December 2013: R2.009 billion). The
revenue growth was supported mainly by growth from its Huawei Enterprise Solutions division, its Microsoft Volume
Licensing offering and Rectron Australia.
The gross profit percentage was marginally down from 13.9% to 13.4% mainly as a result of the lower gross profit
percentage achieved by its Huawei Enterprise Solutions division and its Microsoft Volume Licensing offering. Although the
gross profit percentages achieved by these new lines of business are lower, their contributions to profit are expected to
continue growing.
The increase of 15,6% in distribution, administrative and other operating expenses arose mainly as a result of the
investment in specialists to drive the growth in the new business lines. Distribution, administrative and other operating
expenses as a percentage of revenue was 9.3% (31 December 2013: 10.0%).
The Group’s more conservative forex hedging policy is working well considering the sharp depreciation of the Rand in
the period from 30 June 2014 to 31 December 2014.
The Board is pleased with the significant improvement in Rectron Australia’s revenues and results. Although the
company incurred a loss of R2.6 million for the period under review, it is a significant improvement on the R8.1 million loss
suffered during the comparative period. Revenue grew to R141.3 million (31 December 2013: R30.9 million) and we expect
further improvement to June 2015.
The contribution from our associates increased mainly as a result of the additional attributable earnings generated
from the acquisition of an effective 26% stake in Sizwe Africa IT Group Proprietary Limited, effective from 10 March 2014.
Focus on optimal working capital management continues. Despite the weaker ZAR/USD exchange rate, inventory was down
compared to June 2014.
Mustek’s headline earnings is 26.3% higher at 53.26 cents per share (31 December 2013: 42.15 cents per share) and
basic earnings is 28.5% higher at 53.05 cents per share (31 December 2013: 41.30 cents per share).
Cash flow
The R43.0 million cash used in operations (31 December 2013: R259.6 million) was expected due to the significant
revenue growth and the weaker ZAR/USD exchange rate. This was funded by bank overdraft facilities and is expected to reverse
in the period through to June 2015, in line with historic trends.
Transformation
Following an audit by an accredited verification agency, Mustek was awarded a level 2 B-BBEE rating, using the ICT
sector codes.
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.
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 continuously 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 a 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, installing hundreds of rooftop solar panels and thousands of LED lights. These installations will pay for
themselves in a few years and will not only significantly reduce our overall electricity demand and usage, 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 its 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, which includes providing
antiretroviral drugs to infected 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
Desktop computers still prove a viable option for many corporations, especially within the banking and security
industries. During 2014, the consumer drove adoption, and while the consumer will still have a large influence on adoption,
2015 has been predicted as the year the enterprise begins driving adoption again, via enterprise applications and Windows
10 - creating a core experience for businesses, with a renewed emphasis on the desktop.
The Internet of Things (IoT) is still on the rise, and it is predicted that 1 billion wireless IoT devices will be
shipped in 2015 - up 60% from 2014. This speaks to the emphasis that will be placed on the network and how important the
efficient gathering of this additional data will be. Given the recent security breaches happening globally and locally, a
continued focus will remain on cable and fibre solutions, where corporations will need to start looking back to their
foundational elements to ensure a strong system is in place to effectively handle their data and security needs.
Given this surge in Big Data, demand for devices that are able to process data at fast speeds, have longer battery
life and serve a multitude of needs, will increase. We see an even bigger demand over the next year for Broadwell Core M,
Intel’s fifth-generation processors over the next year, which serve a wide range of devices and needs including tablets,
notebooks, ultrabooks, desktops and smartphones.
Company outlook
Looking ahead, Mustek Limited will continue to refine its broad-based ICT distributor status, where we expect to see
further revenue and profit traction in our Microsoft Volume Licensing offering, Huawei Enterprise Solutions, and CCTV
surveillance and cabling products and services.
The Group is also starting to see some traction in its CCTV Surveillance and Cabling products and expects growing
contributions to both revenue and profit going forward.
Our suite of products provides Mustek with the flexibility to switch focus to more profitable market segments.
Recognising that desktop unit sales are not showing high growth, we can push our strong variety of entry-level, mid-level and
aspirational tablets.
Big Data remains a buzzword in the industry, and will be a focus area for Mustek Limited over the next period. We have
seen significant growth and experienced great success in this sector after the period-end with our NEC Server, NEC
Storage and Fujitsu Scanner ranges. We recognise that Big Data management, and will be key to optimal client retention and
procurement, we will begin exploring opportunities with strategic partners in the service and storage area. In line with
the new B-BBEE code coming in May 2015, an increased focus will be placed on skills development - adding to our
well-established skills development training and certification offerings for current and potential employees.
South Africa has one of the highest rates of public investment in education in the world and the government spends
more on education than on any other sector. Technology and e-learning as a teaching and learning tool and enabler has been
widely accepted as a way to expedite the educational progress within our country. Mustek has, over the last few years,
been investing substantially in this particular market vertical and we believe that we are well positioned to grow our
market share in this sector over the next three to five years. The amount of interest shown by various provinces during
the last few months is encouraging.
Lenovo will be launching ThinkServer in South Africa during the second quarter of 2015 and is undoubtedly interested
in growing its market share in the South African market. To date, Mustek has not been a significant player in this market
and we have started ramping up operations to take hold of the opportunity presented in the local market.
Mustek Limited is well positioned to round off a successful financial year, and we look forward to adapting with the
industry in the years to come.
Share repurchase programme
Mustek acquired a further 1 999 289 ordinary shares in the issued share capital of Mustek on the open market for a
purchase consideration in aggregate of R15 778 140. The general repurchase commenced on 24 November 2014 and continued on a
day-to-day basis as market conditions allowed, and in accordance with the JSE Limited Listings Requirements, until
30 December 2014. The repurchase of shares will continue to be considered by the Board in conjunction with an evaluation of
current and future funding requirements in the period to 30 June 2015. This programme will be effected in accordance
with the terms of the authority granted by shareholders at the annual general meeting held on 12 December 2014. It is
currently intended that any shares purchased will be cancelled and delisted. The market will be notified, in accordance with
applicable listing rules and regulations, if and when purchases are made.
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 the 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 CA(SA) 25 February 2015
Chief Executive Officer Financial Director
(preparer of summarised Group results)
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
Corporate information: www.mustek.co.za
Date: 25/02/2015 08:40:00 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.