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MST
MST
MST - Mustek - Unaudited Financial Results For The Six Months Ended
31 December 2008
Mustek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST ISIN: ZAE000012373
("Mustek" or "the Group")
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED
31 DECEMBER 2008
Revenue up 12%
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
Unaudited Restated
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2008 2007 2008
R000 R000 R000
Continuing
operations
Revenue 1 732 354 1 551 871 3 408 704
Cost of sales (1 410 834) (1 297 508) (2 842 966)
Gross profit 321 520 254 363 565 738
Other income 9 301 15 104 16 187
Distribution, (288 613) (184 291) (420 516)
administrative and
other operating
expenses
Share of profit from - 606 6 120
associates
Profit from 42 208 85 782 167 529
operations
Investment revenues 15 650 11 925 24 930
Finance costs (32 021) (28 961) (59 103)
Other losses (407) - -
Profit before tax 25 430 68 746 133 356
Income tax expense (7 117) (26 456) (45 293)
Profit for the year 18 313 42 290 88 063
from continuing
operations
Discontinued
operations
Loss for the year - (457) (457)
from discontinued
operations
Profit for the 18 313 41 833 87 606
period
Attributable to:
Equity holders of 22 815 42 135 81 385
the parent
Minority interest (4 502) (302) 6 221
18 313 41 833 87 606
Earnings and
dividend per share
(cents)
Weighted number of 110 449 804 110 158 334 110 303 273
ordinary shares in
issue
Ordinary shares in 110 449 804 110 449 804 110 449 804
issue
From continuing and
discontinued
operations
Basic earnings per 20,66 38,25 73,78
ordinary share
Diluted basic 20,66 38,15 73,67
earnings per
ordinary share
Dividend per 10,00 30,00 50,00
ordinary share -
paid
Dividend per - 20,00 10,00
ordinary share -
proposed
From continuing
operations
Basic earnings per 20,66 38,66 74,19
ordinary share
Diluted basic 20,66 38,56 74,09
earnings per
ordinary share
Headline earnings
per share (cents)
From continuing and
discontinued
operations
Headline earnings 21,77 36,22 73,73
per ordinary share
Diluted headline 21,77 36,12 73,62
earnings per
ordinary share
From continuing
operations
Headline earnings 21,77 36,64 76,34
per ordinary share
Diluted headline 21,77 36,54 76,23
earnings per
ordinary share
Reconciliation
between basic and
headline earnings
Basic earnings 22 815 42 135 81 385
attributable to
equity holders of
the parent
Realisation of - (2 869) (2 869)
foreign currency
translation reserve
Loss on disposal of - 451 451
subsidiary
Group`s share of 1 229 183 2 363
loss on disposal of
property, plant and
equipment
Headline earnings 24 044 39 900 81 330
Net asset value per 503,79 471,09 497,44
share (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
Unaudited Restated
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2008 2007 2008
R000 R000 R000
ASSETS
Non-current assets
Property, plant and 186 403 120 192 177 514
equipment
Intangible assets 51 161 41 080 50 590
Investments in associates 7 510 27 593 6 940
Investment in joint 1 000 1 129 1 000
venture
Other investments and 49 685 17 983 46 656
loans
Deferred tax asset 23 214 27 143 25 159
Non-current trade and 25 968 10 370 25 667
other receivables
344 941 245 490 333 526
Current assets
Inventories 789 559 552 424 772 690
Trade and other 598 355 515 724 503 416
receivables
Foreign currency assets 460 1 111 3 065
Tax assets 699 1 531 1 505
Bank balances and cash 124 964 233 731 420 103
1 514 037 1 304 521 1 700 779
TOTAL ASSETS 1 858 978 1 550 011 2 034 305
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 884 884 884
Ordinary share premium 122 553 118 100 121 031
Retained earnings 414 447 386 448 403 608
Properties revaluation 7 794 5 205 7 794
reserve
Investment revaluation 8 465 8 363 8 465
reserve
Foreign currency 2 294 1 315 7 634
translation reserve
Equity attributable to 556 437 520 315 549 416
equity holders of the
parent
Minority interest 15 482 12 885 19 408
Total equity 571 919 533 200 568 824
Non-current liabilities
Long-term borrowings 404 333 310 468 318 542
Deferred tax liabilities 863 169 921
405 196 310 637 319 463
Current liabilities
Short-term borrowings 22 295 38 510 63 900
Trade and other payables 671 684 443 333 918 549
Provisions 16 960 13 850 12 953
Foreign currency 1 873 3 016 361
liabilities
Deferred income 26 617 26 513 28 001
Tax liabilities 8 793 20 184 23 719
Bank overdrafts 133 641 160 768 98 535
881 863 706 174 1 146 018
Total liabilities 1 287 059 1 016 811 1 465 481
TOTAL EQUITY AND 1 858 978 1 550 011 2 034 305
LIABILITIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2008 2007 2008
R000 R000 R000
Operating activities
Cash receipts from 1 644 793 1 521 956 3 368 220
customers
Cash paid to suppliers (1 929 180) (1 712 581) (3 194 483)
and employees
Net cash (used in) from (284 387) (190 625) 173 737
operations
Investment revenues 6 586 8 827 18 648
received
Finance costs paid (32 021) (28 961) (59 103)
Dividends received 1 516 3 098 6 282
Dividends paid (11 976) (33 435) (55 525)
Income taxes paid (21 694) (783) (10 265)
Net cash (used in) from (341 976) (241 879) 73 774
operating activities
Net cash used in (32 455) (14 368) (103 484)
investing activities
Net cash from financing 79 292 121 185 81 020
activities
Net (decrease) increase (295 139) (135 062) 51 310
in cash and cash
equivalents
Cash and cash 420 103 368 793 368 793
equivalents at
beginning of the period
Cash and cash 124 964 233 731 420 103
equivalents at the end
of the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary
share share Retained
capital premium earnings
R000 R000 R000
Balance at 30 June 2007 877 111 198 377 748
Profit for the period - - 42 135
Shares issued in terms of option 7 4 164 -
scheme
Recognition of share-based - 2 738 -
payments
Dividends paid - - (33 435)
Asset revaluation - - -
Realisation of foreign currency - - -
translation reserve
Net foreign currency translation - - -
reserve - foreign entities
Investment in subsidiary - - -
Restated balance at 31 December 884 118 100 386 448
2007
Profit for the period - - 39 250
Shares issued in terms of option - - -
scheme
Recognition of share-based - 2 931 -
payments
Dividends paid - - (22 090)
Asset revaluation - - -
Realisation of foreign currency - - -
translation reserve
Net foreign currency translation - - -
reserve - foreign entities
Investment in subsidiary - - -
Balance at 30 June 2008 884 121 031 403 608
Profit for the period - - 22 815
Recognition of share-based - 1 522 -
payments
Dividends paid - - (11 976)
Net foreign currency translation - - -
reserve - foreign entities
Restated balance at 31 December 884 122 553 414 447
2008
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Investments` Properties`
revaluation revaluation Translation
reserve reserve reserve
R000 R000 R000
Balance at 30 June 2007 21 925 5 205 4 968
Profit for the period - - -
Shares issued in terms of - - -
option scheme
Recognition of share- - - -
based payments
Dividends paid - - -
Asset revaluation (13 562) - -
Realisation of foreign - (2 869)
currency translation
reserve
Net foreign currency - - (784)
translation reserve -
foreign entities
Investment in subsidiary - - -
Restated balance at 31 8 363 5 205 1 315
December 2007
Profit for the period - - -
Shares issued in terms of - - -
option scheme
Recognition of share- - - -
based payments
Dividends paid - - -
Asset revaluation 102 2 589 -
Realisation of foreign - - -
currency translation
reserve
Net foreign currency - - 6 319
translation reserve -
foreign entities
Investment in subsidiary - - -
Balance at 30 June 2008 8 465 7 794 7 634
Profit for the period - - -
Recognition of share- - - -
based payments
Dividends paid - - -
Net foreign currency - - (5 340)
translation reserve -
foreign entities
Restated balance at 31 8 465 7 794 2 294
December 2008
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable
To equity
Holders of Minority
The parent Interest Total
R000 R000 R000
Balance at 30 June 2007 521 921 10 187 532 108
Profit for the period 42 135 (302) 41 833
Shares issued in terms of 4 171 - 4 171
option scheme
Recognition of share-based 2 738 - 2 738
payments
Dividends paid (33 435) - (33 435)
Asset revaluation (13 562) - (13 562)
Realisation of foreign (2 869) - (2 869)
currency translation reserve
Net foreign currency (784) - (784)
translation reserve - foreign
entities
Investment in subsidiary - 3 000 3 000
Restated balance at 31 520 315 12 885 533 200
December 2007
Profit for the period 39 250 6 523 45 773
Shares issued in terms of - - -
option scheme
Recognition of share-based 2 931 - 2 931
payments
Dividends paid (22 090) - (22 090)
Asset revaluation 2 691 - 2 691
Realisation of foreign - - -
currency translation reserve
Net foreign currency 6 319 - 6 319
translation reserve - foreign
entities
Investment in subsidiary - - -
Balance at 30 June 2008 549 416 19 408 568 824
Profit for the period 22 815 (4 502) 18 313
Recognition of share-based 1 522 - 1 522
payments
Dividends paid (11 976) - (11 976)
Net foreign currency (5 340) 576 (4 764)
translation reserve - foreign
entities
Restated balance at 31 556 437 15 482 571 919
December 2008
CONDENSED SEGMENT ANALYSIS
Total Mustek Rectron
Business segments R000 R000 R000
Revenue 1 732 354 878 836 671 896
EBITDA* 54 797 20 599 30 101
Depreciation (12 589) (7 163) (4 941)
Profit (loss) from 42 208 13 436 25 160
operations
Investment revenues 15 650 10 252 4 035
Finance costs (32 021) (13 872) (13 199)
Other losses (407) (407) -
Profit before tax 25 430 9 409 15 996
Income tax (expense) benefit (7 117) (573) (5 909)
Profit for the period 18 313 8 836 10 087
Attributable to: -
Equity holders of the parent 22 815 9 281 13 863
Minority interest (4 502) (445) (3 776)
18 313 8 836 10 087
*Earnings before interest,
taxation, depreciation and
amortisation.
Mecer
Total South Africa East Africa
Geographical segments R000 R000 R000
Revenue 1 732 354 1 613 957 11 472
Profit (loss) before tax 25 430 32 057 (598)
Income tax (expense) benefit (7 117) (6 440) 179
Profit (loss) for the period 18 313 25 617 (419)
Attributable to:
Equity holders of the parent 22 815 26 847 (419)
Minority interest (4 502) (1 230) -
18 313 25 617 (419)
CONDENSED SEGMENT ANALYSIS (continued)
Comztek Head office Eliminations
Business segments R000 R000 R000
Revenue 219 279 - (37 657)
EBITDA* 8 046 (3 949) -
Depreciation (485) - -
Profit (loss) from 7 561 (3 949) -
operations
Investment revenues 1 786 - (423)
Finance costs (5 373) - 423
Other losses - - -
Profit before tax 3 974 (3 949) -
Income tax (expense) (1 314) 679 -
benefit
Profit for the period 2 660 (3 270) -
Attributable to:
Equity holders of the 2 941 (3 270) -
parent
Minority interest (281) - -
2 660 (3 270) -
*Earnings before interest,
taxation, depreciation and
amortisation.
Rectron Comztek
Australia Africa
Geographical segments R000 R000
Revenue 68 615 38 310
Profit (loss) before tax (5 667) (362)
Income tax (expense) (822) (34)
benefit
Profit (loss) for the (6 489) (396)
period
Attributable to:
Equity holders of the (3 244) (369)
parent
Minority interest (3 245) (27)
(6 489) (396)
COMMENTRY
1. Statement of compliance
These condensed financial statements for the six months ended 31 December 2008
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 2008 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 2008.
3. Audit report
Neither the consolidated financial results for the six months ended 31 December
2008, 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
The board welcomes Neels Coetzee who was appointed to the board as financial
director on 29 August 2008 and Thembisa Dingaan who was appointed as an
independent non-executive director on 6 February 2009.
7. Cash flow
Increased levels of receivables and a significant reduction in trade and other
payables resulted in cash used in operations of R284,4 million (31 December
2007: R190,6 million). In line with historic trends, this is expected to reverse
in the period through to June 2009.
8. Corporate activities
The Group classified its investment in Wavetrend Technologies Limited as
available for sale in terms of IAS 39, Financial Instruments: Recognition and
Measurement and the comparative numbers at 31 December 2007 have been restated
accordingly.
9. Operating results
Turnover increased by 11,6% to R1,732 billion compared to the previous
corresponding period. The gross profit percentage increased to 18,6% (31
December 2007: 16,4%) and the operating margin is projected at 2,4% (31 December
2007: 5,5%). Included in operating profit is R84,7 million relating to realised
and unrealised foreign exchange losses (31 December 2007: R8,1 million foreign
exchange profits). The majority of these losses have been recovered through
higher selling prices during the period under review, as confirmed by the higher
gross profit margins. Approximately R21 million is expected to be recovered
during the subsequent period.
Mustek uses the Rand/USD spot rate at the beginning of the month to determine
its selling price with adjustments made during the month should the exchange
rate change substantially. As a result of the sharp and sudden depreciation of
the Rand against the USD during October 2008, a substantial amount of inventory
is accounted for at lower levels compared to where the Rand has depreciated to.
This results in higher gross profit percentages as Mustek recovers foreign
exchange losses through higher selling prices. Accounting standards does not
allow the fair valuation of inventory, but require the corresponding foreign
accounts payable to be stated at the closing spot rate. As long as this is the
case and the Rand remains as volatile as it currently is, reported earnings will
remain in line with the volatilities of the Rand.
Excluding forex losses, distribution, administrative and other operating
expenses increased by 10,6%, in line with inflation.
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
South Africa`s economy and its consumers continue to adjust to the unfavourable
impact of a highly troubled global economy and an early end to the depressed
conditions seems unlikely. Nevertheless, the board believes the business is
appropriately structured to compete effectively under these conditions. Mustek
has a portfolio of exceptional brands across a range of segments and price
points, affording it the ability to adjust to changes.
The computer hardware required to get connected - essentially a PC and modem -
is relatively cheap compared to the month-after-month costs of the present
offerings that South African consumers must use. However, our telecommunications
providers are laying the groundwork for a major expansion of national broadband
capacity. With this, broadband prices should fall sharply as the major providers
compete for market share. Although it is premature to predict the resulting
pricing models, we are confident that falling telecommunications prices will
enable many new broadband consumers to enter the market. Existing users will
also be tempted to upgrade their hardware to take advantage of the high-speed
broadband services, i.e. streaming video, that will become more affordable.
We anticipate the release of Windows 7 in the fourth quarter of this year.
Currently in Beta 1 the product has generated enthusiasm and positive comments
in the press not normally associated with a beta. This is a very encouraging
development and we expect the final product to be met with as much excitement.
12. Company outlook
The company is undertaking a review of the overall structure and operations with
a view to improving efficiency and profitability. The emphasis on increasing
volumes remains a driver of performance across our operations. Key risks
affecting future profitability include the continued electricity supply, the
ongoing skills shortage and significant fluctuations in the rand/dollar exchange
rate.
The company is placing increased focus on working capital management.
Mustek`s outlook remains focused on sustainable growth. Opportunities for
further optimisation, improved production, further consolidation and cost
management will be explored. Enhanced cash flow will be used prudently to reduce
our debt.
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.
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.
14. Zinox Technologies Limited ("Zinox")
On 29 August 2008, it was reported that Zinox had merged with two Nigerian
distribution companies with the intention of undertaking a private placement and
applying to the Nigerian Stock Exchange for a listing during December 2008. The
current economic environment led to the postponement of the private placement
and listing. The board believes that it is not in the best interest of Mustek
and all its stakeholders to go ahead in the current environment but remain
committed to see the listing through as it should unlock value for shareholders.
The investment is currently disclosed at cost plus equity accounted earnings at
R28,1 million in terms of the exception allowed by paragraph 46 (c) of IAS 39,
Financial Instruments: Recognition and Measurement.
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
26 February 2009
Corporate information: www.mustek.co.za
Company secretary: Neels Coetzee
Transfer secretaries: Computershare Investor Services
(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 e-mail: ltd@jhb.mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 26/02/2009 17:15:01 Produced by the JSE SENS Department.
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