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MST
MST
MST - Mustek Limited - Unaudited financial results for the six months
ended 31December 2007
Unaudited financial results for the six months ended 31 December 2007
INTERIM DIVIDEND OF 20 CENTS PER SHARE
www.mustek.co.za
(Incorporated in the Republic of South Africa) (Registration number:
1987/070161/06)
Share code: MST
ISIN: ZAE000012373
("Mustek" or "the Group")
Company secretary: Neels Coetzee
Transfer secretaries: Computershare Investor Services 2004
(Proprietary) 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 e-mail: ltd@jhb.mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
Unaudited Restated Restated
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2007 2006 2007
R000 R000 R000
Continuing operations
Revenue 1 551 871 1 506 916 3 261 676
Cost of sales (1 297 508) (1 232 751) (2 725 462)
Gross profit 254 363 274 165 536 214
Other income 15 104 8 910 9 415
Distribution, (184 291) (186 719) (389 848)
administrative and other
operating expenses
Share of profit from 606 4 710 3 097
associates
Profit from operations 85 782 101 066 158 878
Investment revenues 11 925 12 703 23 659
Finance costs (28 961) (35 464) (64 716)
Fair valuation loss on (16 048) - (2 200)
investments and loans
Dilution of investment in - (346) (346)
joint venture
Profit before tax 52 698 77 959 115 275
Income tax expense (23 970) (15 204) (28 526)
Profit from continuing 28 728 62 755 86 749
operations
Discontinued operations
Loss from discontinued (457) (10 607) (13 920)
operations
Profit for the period 28 271 52 148 72 829
Attributable to:
Equity holders of the 28 573 44 309 59 769
parent
Minority interest (302) 7 839 13 060
28 271 52 148 72 829
Earnings and dividend per
share (cents)
Weighted number of ordinary 110 158 334 108 667 008 109 008 923
shares in issue
Ordinary shares in issue 110 449 804 109 090 732 109 615 732
From continuing and
discontinued operations:
Basic earnings per ordinary 25,94 40,78 54,83
share
Diluted basic earnings per 25,87 40,24 54,21
ordinary share
Dividend per ordinary share 30,00 25,00 55,00
- paid
Dividend per ordinary share 20,00 30,00 30,00
- proposed
From continuing operations:
Basic earnings per ordinary 26,35 50,54 67,60
share
Diluted basic earnings per 26,28 49,88 66,84
ordinary share
Headline earnings per share
(cents)
From continuing and
discontinued operations:
Headline earnings per 23,91 41,09 55,50
ordinary share
Diluted headline earnings 23,84 40,56 54,88
per ordinary share
Adjusted headline earnings 36,22 41,09 57,74
per ordinary share
Adjusted diluted headline 36,12 40,43 56,98
earnings per ordinary share
From continuing operations:
Headline earnings per 26,52 50,85 68,27
ordinary share
Diluted headline earnings 26,45 50,19 67,50
per ordinary share
Adjusted headline earnings 38,83 50,85 70,51
per ordinary share
Adjusted diluted headline 38,72 50,19 69,81
earnings per ordinary share
Reconciliation between
basic and headline earnings
Basic earnings attributable 28 573 44 309 59 769
to equity holders of the
parent
Realisation of foreign (2 869) - -
currency translation
reserve
Loss on disposal of 451 - -
subsidiary
Loss on disposal of 176 - 549
property, plant and
equipment
Dilution of investment in - 346 346
joint venture
Total minority interest 7 - 237
Headline earnings 26 338 44 655 60 505
Fair valuation loss on 16 048 - 2 200
investments and loans
Tax effect (2 486) - 237
Adjusted headline earnings 39 900 44 655 62 942
Net asset value per share 471,09 483,14 476,14
(cents)
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
Unaudited Restated Restated
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2007 2006 2007
R000 R000 R000
ASSETS
Non-current assets
Property, plant and 120 192 111 905 116 609
equipment
Intangible assets 41 080 11 686 40 080
Investments in associates 27 593 33 128 26 982
Investment in joint venture 1 129 10 160 1 129
Other investments and loans 17 983 27 294 32 537
Deferred tax asset 27 143 31 935 32 543
Non-current trade and other 10 370 10 197 10 345
receivables
245 490 236 305 260 225
Current assets
Inventories 552 424 737 203 746 273
Trade and other receivables 515 724 510 968 473 114
Foreign currency assets 1 111 - -
Tax assets 1 531 11 737 3 316
Bank balances and cash 233 731 193 796 368 793
1 304 521 1 453 704 1 591 496
TOTAL ASSETS 1 550 011 1 690 009 1 851 721
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 884 873 877
Ordinary share premium 118 100 103 811 111 198
Retained earnings 393 334 415 584 398 196
Revaluation reserve 5 205 2 018 5 205
Foreign currency 2 792 4 773 6 445
translation reserve
Equity attributable to 520 315 527 059 521 921
equity holders of the
parent
Minority interest 12 885 77 433 10 187
Total equity 533 200 604 492 532 108
Non-current liabilities
Long-term borrowings 310 468 299 495 308 083
Deferred tax liabilities 169 380 777
310 637 299 875 308 860
Current liabilities
Short-term borrowings 38 510 15 386 47 745
Trade and other payables 443 333 627 404 880 638
Provisions 13 850 11 008 10 527
Foreign currency 3 016 3 891 4 889
liabilities
Deferred income 26 513 19 510 29 244
Tax liabilities 20 184 2 232 1 436
Loan from associate - 563 -
Bank overdrafts 160 768 105 648 36 274
706 174 785 642 1 010 753
Total liabilities 1 016 811 1 085 517 1 319 613
TOTAL EQUITY AND 1 550 011 1 690 009 1 851 721
LIABILITIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited
Unaudited Restated Restated
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2007 2006 2007
R000 R000 R000
Operating activities
Cash receipts from 1 521 956 1 461 150 3 285 980
customers
Cash paid to suppliers and (1 712 581) (1 788 480) (3 293 449)
employees
Net cash used in operations (190 625) (327 330) (7 469)
Investment revenues 8 827 7 430 14 749
received
Finance costs paid (28 961) (35 464) (64 716)
Dividends received 3 098 5 273 8 910
Dividends paid (33 435) (27 573) (60 421)
Income taxes paid (783) (22 944) (29 166)
Net cash used in operating (241 879) (400 608) (138 113)
activities
Net cash used in investing (14 368) (12 734) (33 880)
activities
Net cash from financing 121 185 130 217 63 865
activities
Net decrease in cash and (135 062) (283 125) (108 128)
cash equivalents
Cash and cash equivalents 368 793 476 921 476 921
at beginning of the year
Cash and cash equivalents 233 731 193 796 368 793
at end of the period
CONDENSED SEGMENT ANALYSIS
Total Mecer Rectron
Business segments R000 R000 R000
Continuing operations
Revenue 1 551 871 683 983 676 128
EBITDA* 95 068 47 234 33 726
Depreciation (9 892) (4 792) (4 628)
Amortisation of intangible - - -
assets
Share of profits from 606 - -
associate
Profit from operations 85 782 42 442 29 098
Investment revenues 11 925 4 451 4 010
Finance costs (28 961) (13 920) (11 542)
Fair valuation loss on (16 048) - -
investments and loans
Dilution of investment in - - -
joint venture
Profit before tax 52 698 32 973 21 566
Income tax (expense) (23 970) (3 355) (8 947)
benefit
Profit from continuing 28 728 19 618 12 619
operations
Discontinued operations
Loss from discontinued (457) (457) -
operations
Profit for the period 28 271 19 161 12 619
Attributable to:
Equity holders of the 28 573 18 940 13 569
parent
Minority interest (302) 221 (950)
28 271 19 161 12 619
*Earnings before interest, taxation, depreciation and amortisation.
Total South Africa Mecer South
America
Geographical segments R000 R000 R000
Continuing operations
Revenue 1 551 871 1 448 844 -
Profit (loss)/before tax 52 698 49 485 -
Income tax (23 970) (20 639) -
(expense)/benefit
Profit/(loss) from 28 728 28 846 -
continuing operations
Discontinued operations
Loss from discontinued (457) - (457)
operations
Profit/(loss) for the 28 271 28 846 (457)
period
Attributable to:
Equity holders of the 28 573 28 801 (457)
parent
Minority interest (302) 45 -
28 271 28 846 (457)
CONDENSED SEGMENT ANALYSIS
Brotek Comztek Invest- Elimina-
ments tions
Business segments R000 R000 R000 R000
Continuing operations
Revenue 73 651 158 958 - (40 849)
EBITDA* 7 125 6 983 - -
Depreciation (115) (357) - -
Amortisation of - -
intangible assets
Share of loss from - - 606 -
associate
Profit from operations 7 010 6 626 606 -
Investment revenues 2 378 1 594 - (508)
Finance costs - (4 007) - 508
Fair valuation loss on - - (16 048) -
investments and loans
Dilution of investment in - - - -
joint venture
Profit before tax 9 388 4 213 (15 442) -
Income tax (expense) (2 836) (1 318) 2 486 -
benefit
Profit from continuing 6 552 2 895 (12 956) -
operations
Discontinued operations
Loss from discontinued - - - -
operations
Profit for the period 6 552 2 895 (12 956) -
Attributable to:
Equity holders of the 6 552 2 468 (12 956) -
parent
Minority interest - 427 - -
6 552 2 895 (12 956) -
*Earnings before interest, taxation, depreciation and amortisation.
Mecer Rectron Comztek Nigeria
East Ausralia Africa
Africa
Geographical segments R000 R000 R000 R000
Continuing operations
Revenue 8 433 71 232 23 362 -
Profit (loss)/before tax 121 2 334 152 606
Income tax (36) (3 253) (42) -
(expense)/benefit
Profit/(loss) from 85 (919) 110 606
continuing operations
Discontinued operations
Loss from discontinued - - - -
operations
Profit/(loss) for the 85 (919) 110 606
period
Attributable to:
Equity holders of the 85 (459) (3) 606
parent
Minority interest - (460) 113 -
85 (919) 110 606
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R000 Ordinary Ordinary Preference Preference Retained
share share share share earnings
capital premium capital premium
Balance at 860 95 017 265 4 000 398 848
30 June 2006
Profit for - - - - 44 309
the period
Shares 13 5 687 - - -
issued in
terms of
option
scheme
Recognition - 3 107 - - -
of share-
based
payments
Dividends - - - - (27 573)
paid
Preference - - (265) (4 000) -
share
redeemed
Asset - - - - -
revaluation
Net foreign - - - - -
currency
translation
reserve -
foreign
entities
Balance at 873 103 811 - - 415 584
31 December
2006
Profit for - - - - 15 460
the period
Shares 4 2 585 - - -
issued in
terms of
option
scheme
Recognition - 4 802 - - -
of share-
based
payments
Dividends - - - - (32 848)
paid
Dividends - - - - -
paid by
subsidiary
Asset - - - - -
revaluation
Net foreign - - - - -
currency
translation
reserve -
foreign
entities
Increase in - - - - -
investments
in
subsidairies
Balance at 877 111 198 - - 398 196
30 June 2007
Profit for - - - - 28 573
the period
Shares 7 4 164 - - -
issued in
terms of
option
scheme
Recognition - 2 738 - - -
of share-
based
payments
Dividends - - - - (33 435)
paid
Realisation - - - - -
of foreign
currency
translation
reserve
Net foreign - - - - -
currency
translation
reserve -
foreign
entities
Investment - - - - -
in
subsidiary
Balance at 884 118 100 - - 393 334
31 December
2007
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R000 Revaluation Translation Attributable Minority Total
reserve reserve to equity interest
holders of
the parent
Balance at 2 014 4 819 505 823 69 594 575
30 June 2006 417
Profit for - - 44 309 7 839 52 148
the period
Shares - - 5 700 - 5 700
issued in
terms of
option
scheme
Recognition - - 3 107 - 3 107
of share-
based
payments
Dividends - - (27 573) - (27
paid 573)
Preference - - (4 265) - (4
share 265)
redeemed
Asset 4 - 4 - 4
revaluation
Net foreign - (46) (46) - (46)
currency
translation
reserve -
foreign
entities
Balance at 2 018 4 773 527 059 77 433 604
31 December 492
2006
Profit for - - 15 460 5 221 20 681
the period
Shares - - 2 589 - 2 589
issued in
terms of
option
scheme
Recognition - - 4 802 - 4 802
of share-
based
payments
Dividends - - (32 848) - (32
paid 848)
Dividends - - - (10 (10
paid by 249) 249)
subsidiary
Asset 1 952 - 1 952 960 2 912
revaluation
Net foreign - 1 020 1 020 492 1 512
currency
translation
reserve -
foreign
entities
Increase in 1 235 652 1 887 3 000 (61
investments 783)
in
subsidairies
Balance at 5 205 6 445 521 921 10 187 532
30 June 2007 108
Profit for - - 28 573 (302) 28
the period 271
Shares - - 4 171 - 4 171
issued in
terms of
option
scheme
Recognition - - 2 738 - 2 738
of share-
based
payments
Dividends - - (33 435) - (33
paid 435)
Realisation (2 869) (2 869) - (2
of foreign 869)
currency
translation
reserve
Net foreign - (784) (784) - (784)
currency
translation
reserve -
foreign
entities
Investment - - - 3 000 3 000
in
subsidiary
Balance at 5 205 2 792 520 315 12 885 533
31 December 200
2007
COMMENTARY
1. BASIS OF PRESENTATION
These condensed financial statements for the six months ended 31
December 2007 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, as amended.
2. ACCOUNTING POLICIES
The unaudited results for the six months ended 31 December 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 preparation of the audited
annual financial statements for the year ended 30 June 2007, with the
exception of the adoption of IFRS 7 Financial Instruments:
Disclosures.
3. AUDIT REPORT
Neither the consolidated financial results for the six months ended
31 December 2007, nor this set of summarised financial information
has been audited by the Group`s auditors, and thus no audit report
was issued.
4. CORPORATE GOVERNANCE
The Group subscribes to and complies in all material aspects 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 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.
6. BOARD OF DIRECTORS
There has been no change to the board of directors in the period
under review.
7. CASH FLOW
Increased levels of receivables and a significant reduction in trade
and other payables resulted in cash used in operations of R191
million. In line with historic trends, this is expected to reverse in
the period through to June 2008.
8. CORPORATE ACTIVITIES
On 7 September 2007, Mustek acquired 50% of Digital Surveillance
Systems (Pty) Limited for R4 million. Mustek disposed of Mecer
Digital Do Brazil LTDA on 6 November 2007 for US$1 and the
comparative income statements have been restated accordingly to
include the subsidiary`s results in discontinued operations.
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 the fair
valuation of the investment in Wavetrend Technologies Limited (12,3
cents), losses incurred in Mecer Digital Do Brazil LTDA (2,6 cents),
share-based payments expensed (2,5 cents) and a STC charge on
dividends paid (3,5 cents). In total, headline earnings per share
have been negatively affected by 20,9 cents per share as a result of
these charges and expenses. The share-based payments expense should
reduce by 47% in the next interim period and the losses in Mecer
Brazil will not be repeated as the subsidiary was disposed. The
investment in Wavetrend Technologies Limited is currently valued at
R8,5 million.
The Group`s gross margin from continuing operations decreased to
16,4% from 18,2% in the previous corresponding period. The gross
profit margin for the financial year to June 2007 was 16,4%.
Distribution, administrative and other operating expenses were well
controlled when taking into account that forex losses of R12,2
million were included in distribution, administrative and other
operating expenses in the previous corresponding period. Forex
profits of R9,7 million was earned and is included in other income in
the current period.
10. RETIREMENT BENEFIT PLAN
The Mustek Group Retirement Fund is a defined contribution fund,
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 much anticipated Service Pack 1 for Microsoft Windows Vista was
released this month and we believe enterprise adoption rate should
accelerate now that the service pack has been released. Performance
and compatibility improvements should convince users to migrate. This
should have a positive effect on PC sales.
The imminent launch of High Definition Television in South Africa
will stimulate the creation of High Definition content for consumers.
Once consumers have experienced High Definition TV they will not be
satisfied with Standard Definition for their own content. Typical
file sizes for an hour of High Definition video are over 5GB
sometimes even 10GB. This pushes the hardware and storage requirement
beyond notebook computers. Typical notebook hard drives top out at
500 Gigabyte with a punitive cost per gigabyte. Desktop computers by
virtue of their form factor can accommodate multiple hard drives with
a maximum size of 1 Terabyte.
The pervasiveness of digital photography has meant that the majority
of pictures taken today are digital. Unlike traditional film
photography there is no film/negative backup of these pictures so it
has become vital that these "digital memories" are stored securely.
Products like the recently released Microsoft Windows Home Server
make it easy to backup and share all these memories and at the same
time introduce file servers with multiple disks to consumers. We
believe we are well positioned to take advantage of this market.
For many years we have worried over the cost and accessibility of
broadband internet. This we believe is a limiting factor in PC
adoption. The massive push by the mobile cellular carriers into this
space is encouraging as the competition can only have a positive
effect. The introduction of 3.6Mbs should increase the competition to
the fixed line operators. 7.2Mbs would sure make it interesting.
Server sales should be stimulated with the release of Windows Server
2008. Companies looking to reduce infrastructure costs are using
virtualisation more and this is boosting server sales. Virtualisation
allows a single server to run multiple operating systems and
applications. Document management systems are becoming more common
and this should serve to drive server sales.
12. BEE TRANSACTION AND CAUTIONARY ANNOUNCEMENT
The board is currently in negotiations with a potential BEE partner
and will make a formal announcement as soon as the negotiations have
been finalised. Accordingly, shareholders are advised to exercise
caution when dealing in the company`s securities until a further
announcement is made.
13. GROUP OUTLOOK
Growth prospects for the next six months are likely to be influenced
by the extent of the rollout of equipment replacement by Government
and industry, market retention and growth by Mustek, the volatility
of the currency and the demand for hardware and software.
14. 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 an interim dividend of 20
cents per ordinary share for the period ended 31 December 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 interim dividend are as follows:
Last day of trade cum dividend Friday, 28 March 2008
First day to trade ex dividend Monday, 31 March 2008
Record date Friday, 4 April 2008
Payment date Monday, 7 April 2008
No share certificates may be dematerialised or rematerialised between
Monday, 31 March 2008 and Friday, 4 April 2008, 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.
15. POST-BALANCE SHEET EVENTS
There have been no significant events subsequent to period-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
28 February 2008
Date: 28/02/2008 17:15:02 Produced by the JSE SENS Department.
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