| Thu 30 Aug 2007, 17:15 | | MST - Mustek Limited - Audited financial results f |
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MST
MST - Mustek Limited - Audited financial results for the year ended 30 June 2007
MUSTEK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST & ISIN: ZAE000012373
("Mustek" or "the Group")
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2007
Bank balances and cash of R369 million
Total dividend of 60 cents per share
CONDENSED CONSOLIDATED INCOME STATEMENT
2007 2006
R000 R000
Continuing operations
Revenue 3 354 661 3 056 451
Cost of sales (2 803 598) (2 553 827)
Gross profit 551 063 502 624
Other income 9 415 17 738
Distribution, administrative and other (418 617) (412 067)
operating expenses
Share of profit from associates 3 097 4 660
Profit from operations 144 958 112 955
Investment revenues 23 659 28 946
Finance costs (64 716) (63 846)
Other losses (2 546) (624)
Profit before tax 101 355 77 431
Income tax expense (28 526) (15 966)
Profit from continuing operations 72 829 61 465
Discontinued operations
Profit from discontinued operations - 13 128
Profit for the year 72 829 74 593
Attributable to:
Equity holders of the parent 59 769 61 821
Minority interest 13 060 12 772
72 829 74 593
Earnings and dividend per share (cents)
Ordinary shares in issue 109 615 732 107 514 661
Weighted number of ordinary shares in 109 008 923 106 595 794
issue
From continuing and discontinued
operations:
Basic earnings per ordinary share 54,83 58,00
Diluted basic earnings per ordinary 54,21 56,92
share
Dividend per ordinary share - paid 55,00 65,00
Dividend per ordinary share - proposed 30,00 25,00
From continuing operations:
Basic earnings per ordinary share 54,83 49,89
Diluted basic earnings per ordinary 54,21 48,96
share
Headline earnings per share (cents)
From continuing and discontinued
operations:
Headline earnings per ordinary share 55,50 44,15
Diluted headline earnings per ordinary 54,88 43,33
share
From continuing operations:
Headline earnings per ordinary share 55,50 47,85
Diluted headline earnings per ordinary 54,88 46,97
share
Reconciliation between basic and
headline earnings
Basic earnings attributable to equity 59 769 61 821
holders of the parent
Impairment of goodwill - 298
Group`s share of profit on disposal of - (12 596)
subsidiaries and other businesses
Group`s share of loss (profit) on 390 (2 465)
disposal of property, plant and
equipment
Loss on dilution of joint venture 346 -
Headline earnings 60 505 47 058
Net asset value per share (cents) 476,14 470,47
CONDENSED CONSOLIDATED BALANCE SHEET
2007 2006
R000 R000
ASSETS
Non-current assets
Property, plant and equipment 116 609 105 429
Intangible assets 40 080 11 735
Investments in associates 26 982 28 557
Investment in joint venture 1 129 1 106
Other investments and loans 32 537 26 868
Deferred tax asset 32 543 30 330
Non-current trade and other receivables 10 345 22 116
260 225 226 141
Current assets
Inventories 746 273 763 399
Trade and other receivables 473 114 401 695
Foreign currency assets - 10 599
Tax assets 3 316 10 814
Bank balances and cash 368 793 476 921
1 591 496 1 663 428
TOTAL ASSETS 1 851 721 1 889 569
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 877 860
Ordinary share premium 111 198 95 017
Preference share capital - 265
Preference share premium - 4 000
Retained earnings 398 196 398 848
Revaluation reserve 5 205 2 014
Foreign currency translation reserve 6 445 4 819
Equity attributable to equity holders of 521 921 505 823
the parent
Minority interest 10 187 69 594
Total equity 532 108 575 417
Non-current liabilities
Long-term borrowings 308 083 115 805
Deferred tax liabilities 777 808
308 860 116 613
Current liabilities
Short-term borrowings 47 745 173 470
Trade and other payables 880 638 976 556
Provisions 10 527 11 628
Foreign currency liabilities 4 889 5 655
Deferred income 29 244 20 729
Tax liabilities 1 436 7 029
Bank overdrafts 36 274 2 472
1 010 753 1 197 539
Total liabilities 1 319 613 1 314 152
TOTAL EQUITY AND LIABILITIES 1 851 721 1 889 569
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
2007 2006
R000 R000
Operating activities
Cash receipts from customers 3 285 980 3 211 073
Cash paid to suppliers and employees (3 293 449) (2 989 010)
Net cash (used in) from operations (7 469) 222 063
Investment revenues received 14 749 19 039
Finance costs paid (64 716) (63 416)
Dividends received 8 910 9 937
Dividends paid (60 421) (69 440)
Income taxes paid (29 166) (19 429)
Net cash (used in) from operating (138 113) 98 754
activities
Net cash (used in) from investing (33 880) 11 962
activities
Net cash from (used in) financing 63 865 (32 197)
activities
Net (decrease) increase in cash and cash (108 128) 78 519
equivalents
Cash and cash equivalents at beginning 476 921 398 402
of the year
Cash and cash equivalents at end of the 368 793 476 921
year
CONDENSED SEGMENT ANALYSIS
Business Total Mecer Rectron Brotek
segments
R000 R000 R000 R000
Revenue 3 354 661 1 589 892 1 462 556 168 572
EBITDA* 163 958 59 547 72 457 28 660
Depreciation (22 000) (11 335) (9 790) (266)
Amortisation of (97) (97) - -
intangible
assets
Share of profit 3 097 - - -
of associates
Operating 144 958 48 115 62 667 28 394
profit
Investment 23 659 11 442 6 886 3 284
revenues
Finance costs (64 716) (29 970) (28 344) (3)
Other losses (2 546) (250) - -
Profit (loss) 101 355 29 337 41 209 31 675
before tax
Income tax (28 526) (10 062) (9 761) (9 408)
(expense)
benefit
Profit (loss) 72 829 19 275 31 448 22 267
for the year
Attributable
to:
Equity holders 59 769 19 275 18 434 22 267
of the parent
Minority 13 060 - 13 014 -
interest
72 829 19 275 31 448 22 267
*Earnings before interest, taxation, depreciation and amortisation.
**43,6% proportionately consolidated.
Geographical Total South Africa South Mecer East
segments America Africa
R000 R000 R000 R000
Revenue 3 354 661 3 081 046 92 985 18 739
Profit (loss) 72 829 77 027 (13 920) 2 663
for the year
Attributable
to:
Equity holders 59 769 66 152 (13 920) 2 663
of the parent
Minority 13 060 10 875 - -
interest
72 829 77 027 (13 920) 2 663
CONDENSED SEGMENT ANALYSIS
Business segments Comztek** Investments Eliminations
R000 R000 R000
Revenue 272 777 - (139 136)
EBITDA* 3 294 - -
Depreciation (609) - -
Amortisation of intangible - - -
assets
Share of profit of associates 96 3 001 -
Operating profit 2 781 3 001 -
Investment revenues 3 204 - (1 157)
Finance costs (7 556) - 1 157
Other losses - (2 296) -
Profit (loss) before tax (1 571) 705 -
Income tax (expense) benefit 942 (237) -
Profit (loss) for the year (629) 468 -
Attributable to:
Equity holders of the parent (675) 468 -
Minority interest 46 - -
(629) 468 -
*Earnings before interest, taxation, depreciation and amortisation.
**43,6% proportionately consolidated.
Geographical segments Rectron Comztek Nigeria
Australia Africa
R000 R000 R000
Revenue 135 746 26 145 -
Profit (loss) for the year 4 370 (312) 3 001
Attributable to:
Equity holders of the parent 2 185 (312) 3 001
Minority interest 2 185 - -
4 370 (312) 3 001
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary Preference
share share share
capital premium capital
R000 R000 R000
Balance at 1 July 2005 837 85 567 265
Profit for the year - - -
Shares issued in terms of 23 6 842 -
option scheme
Recognition of share-based - 2 608 -
payments
Dividends paid - - -
Asset revaluation - - -
Net foreign currency
translation reserve
- foreign entities - - -
Investments in subsidiaries - - -
Balance at 30 June 2006 860 95 017 265
Profit for the year - - -
Shares issued in terms of 17 8 272 -
option scheme
Preference share redeemed - - (265)
Recognition of share-based - 7 909 -
payments
Dividends paid - - -
Dividends paid by subsidiary - - -
Asset revaluation - - -
Net foreign currency
translation reserve
- foreign entities
Investments in subsidiaries - - -
Balance at 30 June 2007 877 111 198 -
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Preference Retained Revaluation
share earnings reserve
premium R000 R000
R000
Balance at 1 July 2005 4 000 406 467 681
Profit for the year - 61 821 -
Shares issued in terms of - - -
option scheme
Recognition of share-based - - -
payments
Dividends paid - (69 440) -
Asset revaluation - - 1 333
Net foreign currency
translation reserve
- foreign entities - - -
Investments in subsidiaries - - -
Balance at 30 June 2006 4 000 398 848 2 014
Profit for the year - 59 769 -
Shares issued in terms of - - -
option scheme
Preference share redeemed (4 000) - -
Recognition of share-based - - -
payments
Dividends paid - (60 421) -
Dividends paid by subsidiary - - -
Asset revaluation - - 1 956
Net foreign currency
translation reserve
- foreign entities
Investments in subsidiaries - - 1 235
Balance at 30 June 2007 - 398 196 5 205
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Translation Attributable Minority Total
reserve to equity interest R000
R000 holders of R000
the parent
R000
Balance at 1 July 2 466 500 283 80 615 580 898
2005
Profit for the year - 61 821 12 772 74 593
Shares issued in - 6 865 - 6 865
terms of option
scheme
Recognition of share- - 2 608 - 2 608
based payments
Dividends paid - (69 440) - (69 440)
Asset revaluation - 1 333 275 1 608
Net foreign currency 2 353 2 353 261 2 614
translation reserve
- foreign entities
Investments in - - (24 329) (24 329)
subsidiaries
Balance at 30 June 4 819 505 823 69 594 575 417
2006
Profit for the year - 59 769 13 060 72 829
Shares issued in - 8 289 - 8 289
terms of option
scheme
Preference share - (4 265) - (4 265)
redeemed
Recognition of share- - 7 909 - 7 909
based payments
Dividends paid - (60 421) - (60 421)
Dividends paid by - - (10 249) (10 249)
subsidiary
Asset revaluation - 1 956 960 2 916
Net foreign currency 974 974 492 1 466
translation reserve
- foreign entities
Investments in 652 1 887 (63 670) (61 783)
subsidiaries
Balance at 30 June 6 445 521 921 10 187 532 108
2007
COMMENTARY
1. BASIS OF PRESENTATION
These condensed financial statements for the year ended 30 June 2007 are a
summary of the Group`s unqualified audited financial statements and are prepared
in accordance with International Financial Reporting Standards (IFRS) applicable
to interim financial reporting (IAS 34), the Listings Requirements of the JSE
Limited and the Companies Act of South Africa.
2. ACCOUNTING POLICIES
The audited results for the year ended 30 June 2007 have been prepared in
accordance with the Group`s accounting policies which comply with IFRS. The
accounting policies adopted are consistent with those applied in the audited
annual financial statements for the year ended 30 June 2006.
3. AUDIT REPORT
The consolidated financial statements for the year have been audited by Deloitte
& Touche and their accompanying unqualified audit report, as well as their
unqualified audit report for this set of summarised financial information, is
available for inspection at the company`s registered address.
4. CORPORATE GOVERNANCE
The Group subscribes to and complies with the Code on Corporate Governance
Practices and Conduct as contained in the second King Report on Corporate
Governance.
5. TRANSFORMATION
Management has continued to meaningfully extend its initiatives in employment
equity, skills development and corporate social investment during the period.
The Group is committed to a process of further transformation and economic
empowerment of its stakeholders, such that acceptable balance between the
imperatives and commercial benefits of such a process can be achieved, thereby
ensuring the sustainability of the Group in a competitive market sector.
6. BOARD OF DIRECTORS
Tony Wang, Technology and International operations director, retired on 31 March
2007 when his contract with the company expired. Total remuneration paid to
directors for the year under review amounted to R2,7 million (2006: R2,8
million) and share-based payments of R4,3 million (2006: Nil) was expensed
relating to directors.
7. CASH FLOW
Bank balances and cash remained strong at R368,8 million due to focused working
capital management. Increased levels of receivables and a significant reduction
in accounts payable resulted in cash used in operations of R7,5 million.
Maintenance of prudent levels of inventory is essential given the nature of the
business and the successful servicing of large tenders.
8. CORPORATE ACTIVITIES
On 8 June 2007, shareholders approved a transaction whereby Mustek acquired the
34,2% of Rectron Limited that it did not own, making it a 100%-owned subsidiary
at year-end.
Comztek (Pty) Limited, a 43,6%-owned joint venture of the Group, increased its
investment in Netshield (Pty) Limited from 31% to 51%.
9. OPERATING RESULTS
Mustek`s major clients include corporate, government, parastatals, retail and an
extensive dealer network.
Headline earnings per share have been negatively affected by losses incurred in
Mecer Brazil (12,8 cents), share-based payments expensed (7,3 cents), other non-
operating losses (2,3 cents), an additional provision for doubtful debts at a
joint venture (4,3 cents) and a downward adjustment to the deferred tax asset as
a result of the STC rate change from 12,5% to 10% (1,5 cents). In total,
headline earnings per share have been negatively affected by 28,2 cents per
share as a result of these expenses. The share-based payments expense should
reduce by 25% in the 2008 financial year and the directors believe that the
losses in Mecer Brazil, other non-operating losses and the additional doubtful
debt provision should not be repeated.
The Group`s gross margin from continuing operations remained constant at 16,4%.
The extension of Mustek`s securitisation arrangement for another 5-year period
resulted in a movement of R160 million from short-term to long-term borrowings.
Mustek securitised its debtors book and obtained R184 million of long-term
finance at a fixed rate of 9,7% nacq (currently 3,8% below the prime rate).
10. RETIREMENT BENEFIT PLAN
The Mustek Group Retirement Fund is a defined-contribution fund, and payments to
the plan are charged as an expense as they fall due. The majority of the Group`s
employees belong to this fund. The Group does not provide additional post-
retirement benefits.
11. INDUSTRY OUTLOOK
The South African Government recently stated that it intends improving public
service delivery by increasing its usage of information communications
technology (ICT) at all levels of government. It also intends focusing on the
education sector and national connectivity to raise the country`s rating as a
user of ICT. The unfolding e-education strategy of the national Department of
Education will certainly benefit the Group, which is well positioned as an
existing supplier to the Department. With ICT penetration in public schooling
still low, the potential for growth in sales to the education sector is an
exciting prospect.
The national Cabinet`s July lekgotla announced that plans are in motion to
create Infraco, a state-owned enterprise that will provide wholesale broadband
access at much reduced charges. Recent cuts in broadband pricing by Telkom is
also accelerating the adoption of broadband by the general public. We expect
this uptake to become quicker and larger as broadband inevitably becomes cheaper
and even more available.
The general uptake of Windows Vista, Microsoft`s latest operating system, has
been lower and slower than expected. We do however believe that the release of
Vista`s Service Pack 1 scheduled for early 2008 will contribute to driving
further growth in hardware sales.
Mecer will pilot a pay-as-you-go (Flex-go) project with Microsoft early next
year. This innovative technology will enable Mecer to target lower LSM levels
than its traditional market, with reduced rather than increased risk. We are
convinced that this offering will dovetail well with Government`s strategy of
increasing national ICT penetration.
On the technology front we note that Intel Corporation is quickening its output
of multi-core processors, with four-core processors becoming more common. The
Core 2 Extreme family is already available with four cores running at 3.0 GHz.
On the mobility/notebook side, the remarkably successful Centrino platform gets
a refresh with the advent of the Santa Rosa platform. Notebooks are getting
improved wireless performance through the in 802.11n standard, faster processors
and sharper graphics, all without sacrificing battery life. Desktop management
technologies such as VPro are now appearing in notebooks, which should improve
the Total Cost of Ownership (TCO) for corporate customers. The fourth quarter of
this year should also see the release of games specifically created for
Microsoft Direct X 10. The resulting almost cinematic quality of game play will
stimulate gamers into buying new hardware capable of handling these new-
generation games.
Another technology expected to sweep across South Africa is WiMAX (Worldwide
Interoperability for Microwave Access), a technology for transmitting wireless
data over long distances. WiMAX allows a user, for example, to browse the
internet on a notebook without physically connecting it to a network. Many
companies are already using WiMAX as an alternative to ADSL for high-speed last
mile internet access. With areas of low population density and flat terrain
being particularly suited to WiMAX, we foresee it becoming the primary method of
providing the internet to rural and unwired urban areas. This further extension
of high-speed internet access across larger sections of the country will
obviously grow the market for PCs and related equipment in those areas.
12. BEE TRANSACTION
The board is currently assessing various proposals and will make an announcement
as soon as a decision has been taken on its preferred BEE partners.
13. DIVIDEND
The declaration of cash dividends will continue to be considered by the board in
conjunction with an evaluation of current and future funding requirements, and
will be adjusted to levels considered appropriate at the time of declaration.
Accordingly, notice is hereby given that a final dividend of 30 cents per
ordinary share for the year ended 30 June 2007 has been declared, payable to
shareholders recorded in the books of the company at the close of business on
the record date appearing below. The salient dates applicable to the final
dividend are as follows:
Last day of trade cum Friday, 14 September 2007
dividend
First day to trade ex dividend Monday, 17 September 2007
Record date Friday, 21 September 2007
Payment date Tuesday, 25 September 2007
No share certificates may be dematerialised or rematerialised between Monday, 17
September 2007 and Friday, 21 September 2007, 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.
14. ANNUAL GENERAL MEETING
The notice of the annual general meeting will be included in the annual report
that will be posted to shareholders in due course.
15. POST-BALANCE SHEET EVENTS
There have been no significant events subsequent to year-end up until the date
of this report that requires adjustment or disclosure.
On behalf of the board of directors
David C Kan
Chief Executive Officer
Wilson Vulindlela Cuba
Chairman
30 August 2007
Corporate information: www.mustek.co.za
Company secretary: Neels Coetzee
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107, South
Africa. Telephone: (011) 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@jhb.mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 30/08/2007 17:15:01 Produced by the JSE SENS Department.
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