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Audited provisional consolidated financial results for the year ended 30 June 2015
MUSTEK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST
ISIN: ZAE000012373
(“Mustek” or “the Group”)
Audited provisional consolidated financial results for the year ended 30 June 2015
Revenue up 11.5%
2015 R5.31 billion
2014 R4.76 billion
Dividend per share up 25.0%
2015 35.00 cents
2014 28.00 cents
Headline earnings per share up 24.2%
2015 125.05 cents
2014 100.72 cents
Net asset value per share up 11.7%
2015 959.00 cents
2014 858.67 cents
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
2015 2014
R000 R000
ASSETS
Non-current assets
Property, plant and equipment 174 709 160 029
Intangible assets 62 843 60 032
Investments in associates 61 478 51 589
Other investments and loans 77 653 70 894
Deferred tax asset 29 593 29 164
406 276 371 708
Current assets
Inventories 1 129 663 1 036 984
Inventories in transit 206 035 232 895
Trade and other receivables 1 246 139 839 036
Foreign currency assets 8 179 839
Tax assets 2 059 16 555
Bank balances and cash 459 832 203 163
3 051 907 2 329 472
TOTAL ASSETS 3 458 183 2 701 180
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated capital 93 354 119 627
Retained earnings 894 636 791 787
Non-distributable reserve 809 809
Foreign currency translation reserve 4 949 3 829
Equity attributable to owners of the parent 993 748 916 052
Non-controlling interest 19 268 18 461
Total equity 1 013 016 934 513
Non-current liabilities
Long-term borrowings 23 127 34 788
Deferred tax liabilities 4 576 -
Deferred income 15 627 14 725
43 330 49 513
Current liabilities
Short-term borrowings 2 687 1 474
Trade and other payables 2 011 195 1 400 445
Foreign currency liabilities 1 373 2 452
Deferred income 22 238 35 470
Tax liabilities 2 595 7
Bank overdrafts 361 749 277 306
2 401 837 1 717 154
Total liabilities 2 445 167 1 766 667
TOTAL EQUITY AND LIABILITIES 3 458 183 2 701 180
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
2015 2014
R000 R000
Revenue 5 310 102 4 764 123
Cost of sales (4 624 183) (4 109 007)
Gross profit 685 919 655 116
Other income 37 826 10 006
Foreign currency losses (547) (23 162)
Distribution, administrative and
other operating expenses (489 697) (460 501)
Profit from operations 233 501 181 459
Investment revenues 17 364 6 388
Finance costs (77 416) (50 513)
Other losses - (739)
Share of profit of associates 10 813 6 988
Profit before tax 184 262 143 583
Income tax expense (50 155) (39 400)
Profit for the year 134 107 104 183
Other comprehensive income
Exchange profits on translation
of foreign operations 540 3 228
Other comprehensive income for the year,
net of tax 540 3 228
Total comprehensive income for the year 134 647 107 411
Profit attributable to:
Owners of the parent 132 720 107 334
Non-controlling interest 1 387 (3 151)
134 107 104 183
Total comprehensive income attributable to:
Owners of the parent 133 840 109 663
Non-controlling interest 807 (2 252)
134 647 107 411
Earnings and dividend per share (cents)
Weighted number of ordinary shares in issue 106 228 765 107 255 590
Ordinary shares in issue 103 623 471 106 682 760
Dividend per ordinary share - paid 28.00 20.00
Dividend per ordinary share - proposed 35.00 28.00
Headline earnings per ordinary share 125.05 100.72
Basic earnings per ordinary share 124.94 100.07
Reconciliation between basic and headline earnings
Basic earnings attributable to owners of the parent 132 720 107 334
Group’s share of loss (profit) on disposal of
property, plant and equipment 118 (41)
Group’s share of loss from disposal of investment - 739
Headline earnings 132 838 108 032
Net asset value per share (cents) 959.00 858.67
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
2015 2014
R000 R000
Operating activities
Cash receipts from customers 4 902 999 4 616 623
Cash paid to suppliers and employees (4 528 976) (4 700 380)
Net cash from (used in) operations 374 023 (83 757)
Investment revenues received 17 364 6 388
Finance costs paid (77 416) (50 513)
Dividends paid (29 871) (21 687)
Income taxes paid (29 329) (76 229)
Net cash from (used in) operating activities 254 771 (225 798)
Net cash used in investing activities (46 726) (104 621)
Net cash from financing activities 48 624 66 982
Net increase (decrease) in cash and cash equivalents 256 669 (263 437)
Cash and cash equivalents at the beginning of the year 203 163 466 600
Cash and cash equivalents at the end of the year 459 832 203 163
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (AUDITED)
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 year - 107 334 - - 107 334 (3 151) 104 183
Other comprehensive income - - - 2 329 2 329 899 3 228
Dividends paid - (21 687) - - (21 687) - (21 687)
Acquisition of 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 year - 132 720 - - 132 720 1 387 134 107
Other comprehensive income - - - 1 120 1 120 (580) 540
Dividends paid - (29 871) - - (29 871) - (29 871)
Buy-back of shares (42 491) - - - (42 491) - (42 491)
Share capital issued 16 218 - - - 16 218 - 16 218
Balance at 30 June 2015 93 354 894 636 809 4 949 993 748 19 268 1 013 016
SUMMARISED SEGMENT ANALYSIS (AUDITED)
Total Mustek Rectron Group Eliminations
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Business segments R000 R000 R000 R000 R000 R000 R000 R000 R000 R000
Revenue 5 310 102 4 764 123 3 246 918 3 091 404 2 400 359 2 101 192 - - (337 175) (428 473)
EBITDA* 255 646 201 718 181 055 178 372 67 865 51 403 6 726 (28 057) - -
Depreciation and amortisation (22 145) (20 259) (17 607) (13 286) (4 538) (6 973) - - - -
Profit (loss) from operations 233 501 181 459 163 448 165 086 63 327 44 430 6 726 (28 057) - -
Investment revenues 17 364 6 388 8 742 8 364 8 673 2 300 6 160 1 579 (6 211) (5 855)
Finance costs (77 416) (50 513) (45 022) (29 687) (32 394) (20 826) (6 211) (5 855) 6 211 5 855
Other losses - (739) - - - - - (739) - -
Share of profit of associates 10 813 6 988 - - - - 10 813 6 988 - -
Profit (loss) before tax 184 262 143 583 127 168 143 763 39 606 25 904 17 488 (26 084) - -
Income tax (expense) benefit (50 155) (39 400) (33 895) (41 719) (12 652) (6 734) (3 608) 9 053 - -
Profit (loss) for the year 134 107 104 183 93 273 102 044 26 954 19 170 13 880 (17 031) - -
Attributable to:
Owners of the parent 132 720 107 334 93 273 102 044 28 954 23 132 10 493 (17 842) - -
Non-controlling interest 1 387 (3 151) - - (2 000) (3 962) 3 387 811 - -
134 107 104 183 93 273 102 044 26 954 19 170 13 880 (17 031) - -
*Earnings before interest, taxation, depreciation and amortisation.
Total South Africa Mustek East Africa Rectron Australia
2015 2014 2015 2014 2015 2014 2015 2014
Geographical segments R000 R000 R000 R000 R000 R000 R000 R000
Revenue 5 310 102 4 764 123 4 991 925 4 561 582 49 481 60 881 268 696 141 660
Profit (loss) before tax 184 262 143 583 189 930 158 576 (1 668) 1 289 (4 000) (16 282)
Income tax (expense) benefit (50 155) (39 400) (50 895) (43 869) 740 (605) - 5 074
Profit (loss) for the year 134 107 104 183 139 035 114 707 (928) 684 (4 000) (11 208)
Attributable to:
Owners of the parent 132 720 107 334 135 648 113 896 (928) 684 (2 000) (7 246)
Non-controlling interest 1 387 (3 151) 3 387 811 - - (2 000) (3 962)
134 107 104 183 139 035 114 707 (928) 684 (4 000) (11 208)
COMMENTARY
Corporate information
Mustek is a public 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 information communication technology
(ICT) products and services.
Basis of preparation
The audited provisional summarised consolidated financial information for the year ended 30 June 2015 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 Council, the information at a minimum 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 provisional 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 financial statements for the year ended 30 June 2014.
Auditors’ opinion
Mustek’s independent auditors, Deloitte & Touche, have issued their unmodified opinion on the consolidated annual
financial statements and this set of summarised consolidated financial statements for the year ended 30 June 2015. 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 is consistent in all material aspects with the Group financial statements. Their unmodified audit reports for this
set of summarised consolidated financial statements and the Group annual financial statements are available for
inspection at the company’s registered office. The auditor’s report does not necessarily report on the information contained in
this announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the
auditor’s engagement, they should obtain a full copy of the auditor’s report, together with the accompanying financial
information from the issuer’s registered office. Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the company’s auditors.
Operating results
The Group is pleased to report revenue growth of 11.5% to R5.31 billion (2014: R4.76 billion). The revenue growth was
predominantly generated from the Huawei enterprise solutions division, our Microsoft volume licensing offering,
sustainable energy division and Rectron Australia.
The gross profit percentage reduced from 13.8%, to 12.9% as a result of a higher percentage of lower gross profit
products in the mix, namely Huawei enterprise solutions and Microsoft volume licensing. Although the gross profit
percentages achieved by these new lines of business are lower, their contributions to profit are expected to continue growing.
The gross profit percentage was further impacted as a result of a robbery of inventory at Mustek which resulted in a
net loss of R14.0 million. Management has subsequently upgraded the security controls on the premises and is reviewing
the quantum of the insured amounts.
Included in other income is a net amount of R26.8 million arising from certain disputes that were settled between
Mustek and various parties. The settlement amount remains outstanding at year-end, as the parties agreed to pay the
settlement amount to Mustek on or before 1 June 2016. The outstanding amount attracts interest at a rate of 9% per annum.
Distribution, administrative and other operating expenses increased by 6.3%, in line with expectations.
The Group’s more conservative forex hedging policy is considered effective, considering the sharp depreciation of the
Rand from 30 June 2014 to 30 June 2015. Forex losses reduced from R23.2 million in 2014 to R0.5 million in the current
year.
The Group applies hedge accounting where the requirements of IAS 39 have been met to separate the interest and spot
elements from the forward contracts, and R9.6 million (2014: R7.2 million) was classified as finance costs, as opposed to
forex losses.
The contribution from our associates increased mainly as a result of the additional earnings arising from equity
accounting Mustek’s effective 26% stake in Sizwe Africa IT Group Proprietary Limited for 12 months as opposed to four months
in the previous financial year.
There has been a significant improvement in Rectron Australia’s revenues and performance. Although the company
incurred a loss before tax of R4.0 million for the year under review, it is a significant improvement on the R16.3 million loss
incurred during the comparative period. Revenue grew to R269.7 million (2014: R141.7 million) and a further improvement
for the 2016 financial year is expected.
As a result, Mustek’s headline earnings is 24.2% higher at 125.05 cents per share (2014: 100.72 cents per share) and
basic earnings is 24.8% higher at 124.94 cents per share (2014: 100.07 cents per share).
Cash flow
R374.0 million was generated from operations as opposed to R83.8 million used in operations during the previous
financial year. The increase of 8.9% in inventory on hand is lower than the increase in revenue of 11.5%. Management continues
to focus on optimal working capital management as it remains a driver of profitability in our industry. The increase of
48.5% in trade and other receivables compares well with the increase of 43.6% in trade and other payables and is
testament to the increased levels of activity during the latter period of the financial year. Trade and other receivables
include both the insurance claim and the settlement amount detailed under operating results above.
Transformation
Following an audit by an accredited verification agency, Mustek retained its 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 and prosperity 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 R10.5 million (2014: R14.8 million) and share-based payments of R6.4 million (2014: R6.8 million)
were expensed, relating to directors’ incentives.
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 reviewing our corporate governance practices 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 with
energy-efficient units, installing rooftop solar panels and LED lights. These installations will pay for themselves in a
relatively short time and will not only significantly reduce our overall electricity demand and usage, but 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 that also provides
antiretroviral drugs to infected HIV-positive staff.
Mustek has successfully maintained its ISO 14001 certification since 2004 and has not been sanctioned or fined for
non-compliance with environmental laws and regulations.
Industry outlook
The transition to cloud-based services has led to the Group diversifying away from just being a distributor of
traditional IT hardware. With our appointment as a Microsoft volume licence distributor, we now have the ability to market and
distribute a full range of cloud services to our resellers. The Group’s efforts were recognised and rewarded by
Microsoft this year at its Worldwide Partner Conference receiving the “Distributor of the Year” for its achievements in Office
365 sales. This new division is driven both by Mustek and Rectron sales teams and has achieved 16% market share and 650%
growth year-on-year in reseller numbers. With strong indications of cloud computing growth in the South African market
we are confident of being able to provide the market with profitable and innovative products.
Mobility is a key differentiator in today’s computing reality. Traditional computing in highly climate-controlled
environments evolved to desktop computers and then to notebooks/laptops that allowed computers to be used almost anywhere.
Mobility happened the moment those laptops were provided with affordable connections to the internet. The cost of mobile
data keeps dropping and this is promising for a whole new category of mobility. Wearables and Internet of Things devices
will bring new ways to make sense of our world. The Group is well positioned to become an enabler to our resellers in
this category.
On 29 July 2015, Microsoft released Windows 10 to the world via the internet. Devices that met the upgrade criteria
could get the free upgrade. This was called Release To Web (RTW) and went to existing devices and users of Windows.
Large-scale Windows device manufacturers, however, all gear themselves for the traditional USA back-to-school period and the
impact of Windows 10 will be felt on the market then. Windows 10 brings back the familiar Windows desktop for traditional
keyboard and mouse users but also keeps the touch-friendly interface for users on tablets and two-in-one devices. With
early adoption numbers showing 14 million devices upgraded on the first day, it appears that Windows 10 will be well
received. Microsoft’s strong emphasis on security should see fast adoption in the business space. Innovative logon
technologies like facial recognition will create demand for new hardware to realise the full benefit of Windows 10.
Company outlook
Looking ahead, Mustek will continue to refine its broad-based ICT distributor status, where we expect to see growing
contributions to both revenue and profit going forward in our Microsoft volume licensing offering, Huawei enterprise
solutions division, sustainable energy division, CCTV surveillance division and cabling products and services.
Our suite of products provides Mustek with the flexibility to switch focus to more profitable market segments.
Recognising that desktop unit sales are in decline, we can push our strong variety of entry-level, mid-level and aspirational
tablets.
Big Data will be a focus area for Mustek going forward. We have seen significant growth and experienced great success
in this sector with our NEC Server, NEC Storage and Fujitsu Scanner ranges.
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 over the next three to five years. The amount of interest shown by various provinces during the last few months
is encouraging.
Lenovo launched ThinkServer in South Africa during May 2015 and Mustek was appointed as a distributor. Before, Mustek
had not been a significant participant in this market and we have started ramping up operations to take advantage of the
opportunity presented in the local market.
In conjunction with strategic partners from across the ICT industry, Mustek is well positioned for the forthcoming
years.
Share repurchase programme
Mustek acquired 4 999 289 ordinary shares of its issued share capital on the open market for a purchase consideration
in aggregate of R42 490 958. 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 (JSE) Listings Requirements until 27 May 2015.
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 2016. 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 de-listed. 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 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 gross dividend declared by the Board of directors for the financial
year ended 30 June 2015 has been increased to 35 cents (2014: 28 cents) per share.
Notice is hereby given that a final gross dividend of 35 cents per ordinary share for the year ended 30 June 2015 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 the
company has 103 623 471 ordinary shares in issue and ranking for dividend at the date of this declaration. The South
African dividend tax rate is 15% resulting in a net dividend of 29.75 cents per share to shareholders who are not tax exempt.
The salient dates applicable to the final dividend are as follows:
Last day of trade cum dividend Friday, 25 September 2015
First day to trade ex dividend Monday, 28 September 2015
Record date Friday, 2 October 2015
Payment date Monday, 5 October 2015
No share certificates may be dematerialised or rematerialised between Monday, 28 September 2015 and Friday, 2 October 2015,
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 annual report that will be posted to
shareholders in due course.
Post-balance sheet events
There have been no significant events subsequent to year-end up until the date of this report that require adjustment
to or disclosure in these summarised financial statements.
On behalf of the Board of directors
David Kan Chief Executive Officer Neels Coetzee Financial Director 31 August 2015
(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.
Postal address: 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: 01/09/2015 08:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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