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MST
MST
MST - Mustek Limited - Unaudited Financial Results for the Six Months Ended 31
December 2009
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 2009
Net asset value of 550 cents per share
Basic earnings per share up 53%
Headline earnings per share up 45%
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2009 2008 2009
R000 R000 R000
Revenue 1 601 610 1 732 354 3 481 903
Cost of sales (1 349 491) (1 410 834) (2 916 547)
Gross profit 252 119 321 520 565 356
Other income 15 177 9 301 14 858
Distribution, (197 232) (288 613) (463 623)
administrative and
other operating
expenses
Profit from operations 70 064 42 208 116 591
Investment revenues 6 569 15 650 20 800
Finance costs (27 625) (32 021) (66 051)
Other gains and 207 (407) 2 319
(losses)
Profit before tax 49 215 25 430 73 659
Income tax expense (12 442) (7 117) (21 224)
Profit for the period 36 773 18 313 52 435
Attributable to:
Equity holders of the 34 884 22 815 54 731
parent
Minority interest 1 889 (4 502) (2 296)
36 773 18 313 52 435
Earnings and dividend
per share (cents)
Weighted number of 110 449 804 110 449 804 110 449 804
ordinary shares in
issue
Ordinary shares in 110 449 804 110 449 804 110 449 804
issue
Basic earnings per 31,58 20,66 49,55
ordinary share
Diluted basic earnings 31,58 20,66 49,55
per ordinary share
Dividend per ordinary 10,00 10,00 10,00
share - paid
Dividend per ordinary - - 10,00
share - proposed
Headline earnings per
share (cents)
Headline earnings per 31,66 21,77 48,65
ordinary share
Diluted headline 31,66 21,77 48,65
earnings per ordinary
share
Reconciliation between
basic and headline
earnings
Basic earnings 34 884 22 815 54 731
attributable to equity
holders of the parent
Realisation of foreign - - 1 477
currency translation
reserve
Group`s share of loss 87 1 229 (2 475)
(profit) on disposal of
property, plant and
equipment
Headline earnings 34 971 24 044 53 733
Net asset value per 550,23 503,79 527,12
share (cents)
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2009 2008 2009
R000 R000 R000
ASSETS
Non-current assets
Property, plant and equipment 175 185 186 403 181 376
Intangible assets 56 601 51 161 54 907
Investments in associates 5 708 7 510 5 708
Investment in joint venture - 1 000 -
Other investments and loans 35 146 49 685 34 324
Deferred tax asset 23 694 23 214 24 044
Non-current trade and other 10 569 25 968 15 652
receivables
306 903 344 941 316 011
Current assets
Inventories 488 172 789 559 652 115
Trade and other receivables 612 451 598 355 518 524
Foreign currency assets 142 460 1 604
Tax assets 5 216 699 2 890
Bank balances and cash 244 685 124 964 338 605
1 350 666 1 514 037 1 513 738
TOTAL ASSETS 1 657 569 1 858 978 1 829 749
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 884 884 884
Ordinary share premium 124 395 122 553 123 583
Retained earnings 471 133 414 447 447 294
Properties revaluation 12 048 7 794 12 048
reserve
Investment revaluation - 8 465 -
reserve
Foreign currency translation (727) 2 294 (1 605)
reserve
Equity attributable to equity 607 733 556 437 582 204
holders of the parent
Minority interest 20 377 15 482 18 488
Total equity 628 110 571 919 600 692
Non-current liabilities
Long-term borrowings 299 349 404 333 305 616
Deferred tax liabilities 3 550 863 3 550
302 899 405 196 309 166
Current liabilities
Short-term borrowings 31 557 22 295 115 138
Trade and other payables 512 271 671 684 628 833
Provisions 7 968 16 960 15 448
Foreign currency liabilities 404 1 873 36 846
Deferred income 23 810 26 617 26 034
Tax liabilities 1 481 8 793 6 818
Bank overdrafts 149 069 133 641 90 774
726 560 881 863 919 891
Total liabilities 1 029 459 1 287 059 1 229 057
TOTAL EQUITY AND LIABILITIES 1 657 569 1 858 978 1 829 749
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2009 2008 2009
R000 R000 R000
Operating activities
Cash receipts from 1 523 335 1 644 793 3 472 696
customers
Cash paid to suppliers (1 513 610) (1 929 180) (3 461 717)
and employees
Net cash from (used in) 9 725 (284 387) 10 979
operations
Investment revenues 5 854 6 586 11 504
received
Finance costs paid (27 625) (32 021) (66 051)
Dividends received 715 1 516 1 748
Dividends paid (11 045) (11 976) (11 045)
Income taxes paid (19 772) (21 694) (35 642)
Net cash used in (42 148) (341 976) (88 507)
operating activities
Net cash used in (20 219) (32 455) (30 986)
investing activities
Net cash (used in) from (31 553) 79 292 37 995
financing activities
Net decrease in cash and (93 920) (295 139) (81 498)
cash equivalents
Cash and cash 338 605 420 103 420 103
equivalents at beginning
of the period
Cash and cash 244 685 124 964 338 605
equivalents at the end
of the period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary
share share Retained
capital premium earnings
R000 R000 R000
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
Balance at 31 December 2008 884 122 553 414 447
Profit for the period - - 31 916
Recognition of share-based - 1 030 -
payments
Dividends paid - - 931
Asset revaluation - - -
Asset revaluation realised on - - -
sale of property
Realisation of foreign currency - - -
translation reserve
Net foreign currency translation - - -
reserve - foreign entities
Investment in subsidiary - - -
Balance at 30 June 2009 884 123 583 447 294
Profit for the period - - 34 884
Recognition of share-based - 812 -
payments
Dividends paid - - (11 045)
Net foreign currency translation - - -
reserve - foreign entities
Balance at 31 December 2009 884 124 395 471 133
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Foreign
Investment Property currency
revaluation revaluation translation
reserve reserve reserve
R000 R000 R000
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
Balance at 31 December 2008 8 465 7 794 2 294
Profit for the period - - -
Recognition of share-based - - -
payments
Dividends paid - - -
Asset revaluation (8 465) 6 605 -
Asset revaluation realised - (2 351) -
on sale of property
Realisation of foreign - - 1 477
currency translation reserve
Net foreign currency - - (5 376)
translation reserve -
foreign entities
Investment in subsidiary - - -
Balance at 30 June 2009 - 12 048 (1 605)
Profit for the period - - -
Recognition of share-based - - -
payments
Dividends paid - - -
Net foreign currency - - 878
translation reserve -
foreign entities
Balance at 31 December 2009 - 12 048 (727)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable
to equity
holders of Minority
the parent interest Total
R000 R000 R000
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
Balance at 31 December 2008 556 437 15 482 571 919
Profit for the period 31 916 2 206 34 122
Recognition of share-based 1 030 - 1 030
payments
Dividends paid 931 (613) 318
Asset revaluation (1 860) - (1 860)
Asset revaluation realised on (2 351) - (2 351)
sale of property
Realisation of foreign 1 477 - 1 477
currency translation reserve
Net foreign currency (5 376) (678) (6 054)
translation reserve - foreign
entities
Investment in subsidiary - 2 091 2 091
Balance at 30 June 2009 582 204 18 488 600 692
Profit for the period 34 884 1 889 36 773
Recognition of share-based 812 - 812
payments
Dividends paid (11 045) - (11 045)
Net foreign currency 878 - 878
translation reserve - foreign
entities
Balance at 31 December 2009 607 733 20 377 628 110
CONDENSED SEGMENT ANALYSIS
Total Mustek
2009 2008 2009 2008
Business segments R000 R000 R000 R000
Revenue 1 601 610 1 732 354 719 417 878 836
EBITDA* 84 427 54 797 53 155 20 599
Depreciation (14 363) (12 589) (8 785) (7 163)
Profit (loss) from 70 064 42 208 44 370 13 436
operations
Investment revenues 6 569 15 650 5 055 18 360
Finance costs (27 625) (32 021) (12 887) (13 872)
Other gains and 207 (407) 207 (407)
(losses)
Profit (loss) 49 215 25 430 36 745 17 517
before tax
Income tax (12 442) (7 117) (10 378) (2 843)
(expense) benefit
Profit (loss) for 36 773 18 313 26 367 14 674
the period
Attributable to:
Equity holders of 34 884 22 815 26 367 15 119
the parent
Minority interest 1 889 (4 502) - (445)
36 773 18 313 26 367 14 674
CONDENSED SEGMENT ANALYSIS (continued)
Rectron Comztek
2009 2008 2009 2008
Business segments R000 R000 R000 R000
Revenue 724 074 671 896 182 505 219 279
EBITDA* 30 125 30 101 7 564 8 046
Depreciation (4 762) (4 941) (816) (485)
Profit (loss) from 25 363 25 160 6 748 7 561
operations
Investment revenues 5 140 4 035 1 949 1 786
Finance costs (10 202) (13 199) (4 536) (5 373)
Other gains and - - - -
(losses)
Profit (loss) before 20 301 15 996 4 161 3 974
tax
Income tax (expense) (4 554) (5 909) (754) (1 314)
benefit
Profit (loss) for the 15 747 10 087 3 407 2 660
period
Attributable to:
Equity holders of the 13 590 13 863 3 675 2 941
parent
Minority interest 2 157 (3 776) (268) (281)
15 747 10 087 3 407 2 660
CONDENSED SEGMENT ANALYSIS (continued)
Group Eliminations
2009 2008# 2009 2008#
Business segments R000 R000 R000 R000
Revenue - - (24 386) (37 657)
EBITDA* (6 417) (3 949) - -
Depreciation - - - -
Profit (loss) from (6 417) (3 949) - -
operations
Investment revenues - - (5 575) (8 531)
Finance costs (5 575) (8 108) 5 575 8 531
Other gains and - - - -
(losses)
Profit (loss) before (11 992) (12 057) - -
tax
Income tax (expense) 3 244 2 949 - -
benefit
Profit (loss) for the (8 748) (9 108) - -
period
Attributable to:
Equity holders of the (8 748) (9 108) - -
parent
Minority interest - - - -
(8 748) (9 108) - -
*Earnings before interest, taxation, depreciation and amortisation.
#The prior year segment information has been restated to enhance comparability
of the Mustek Group reportable segments.
Total South Africa
2009 2008 2009 2008
Geographical R000 R000 R000 R000
segments
Revenue 1 601 610 1 732 354 1 494 562 1 613 957
Profit (loss) 49 215 25 430 47 748 32 057
before tax
Income tax (12 442) (7 117) (11 316) (6 440)
(expense) benefit
Profit (loss) for 36 773 18 313 36 432 25 617
the period
Attributable to:
Equity holders of 34 884 22 815 35 477 26 847
the parent
Minority interest 1 889 (4 502) 955 (1 230)
36 773 18 313 36 432 25 617
Mustek East Africa Rectron Australia
2009 2008 2009 2008
Geographical segments R000 R000 R000 R000
Revenue 14 332 11 472 60 805 68 615
Profit (loss) before 263 (598) 2 748 (5 667)
tax
Income tax (expense) (79) 179 (614) (822)
benefit
Profit (loss) for the 184 (419) 2 134 (6 489)
period
Attributable to:
Equity holders of the 184 (419) 1 067 (3 244)
parent
Minority interest - - 1 067 (3 245)
184 (419) 2 134 (6 489)
Comztek Africa
2009 2008
Geographical segments R000 R000
Revenue 31 911 38 310
Profit (loss) before tax (1 544) (362)
Income tax (expense) benefit (433) (34)
Profit (loss) for the period (1 977) (396)
Attributable to:
Equity holders of the parent (1 844) (369)
Minority interest (133) (27)
(1 977) (396)
COMMENTARY
1. Statement of compliance
These condensed financial statements for the six months ended
31 December 2009 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 2009 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 2009.
3. Audit report
Neither the consolidated financial results for the six months ended 31 December
2009, 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 Ralph Patmore who was appointed to the board as an
independent non-executive director on 16 October 2009.
7. Cash flow
Bank balances and cash remained strong at R244,7 million
(31 December 2008: R125,0 million). A significant reduction in both trade and
other payables and inventory levels resulted in R9,7 million cash from
operations (31 December 2008: R284,4 million used). Cash generated from the
continued drive to further improve working capital management will be used to
reduce short-term borrowings.
8. Operating results
The decrease in turnover by 7,5% to R1,602 billion and the lower gross profit
percentage compared to the previous corresponding period, was largely due to the
stronger Rand. Nevertheless, profit from operations increased by 66,0% to R70,1
million (31 December 2008: R42,2 million).
A review of the overall structure has identified various inefficiencies and
duplication of functions. The early identification and implementation of
corrective action has placed Mustek ahead of the curve with respect to cost
containment. As the process was only completed towards the end of the reporting
period, the full benefit will only be achieved in the next financial reporting
period. Further benefits include improved working capital management, reduced
working capital requirements and an elimination of inefficiencies and
duplication.
Excluding forex losses, expenses were well controlled. Distribution,
administrative and other operating expenses decreased by 3,3% and a further
decrease is expected for the year to June due to the restructuring process.
An improved gross margin and better working capital management contributed to
higher profits at Comztek.
Rectron`s contribution to profit attributable to equity holders of the parent
was maintained due to turnover growth and a return to profitability from its
Australian subsidiary.
9. 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.
10. Industry outlook
The market appears to be returning to a state of health, as evidenced in the
recent earnings announcements from global companies. Growth predictions are
finally positive for South Africa with consensus being around 2% for desktops
and 32% for notebooks. Our relaunch of the Mecer notebook range has been well
received and we believe our timing is right given the growth prospects in the
mobile market.
The market expected netbook sales to improve temporarily, but it appears more
sustained. Intel`s Atom platform has gone to dual core, clock speeds are
increasing and innovative designs are
coming to the fore. Consumers are enjoying the prospect of a long battery life
in an ultra-portable design.
Windows 7 is achieving a great market response and the positive sentiment will
drive more companies to adopt it quickly and will result in a hardware refresh
cycle this year on all fronts - government, enterprise, corporate and consumer.
Because of the vast benefits of new hardware in this new operating system, we
expect customers to buy new instead of upgrading old equipment.
A number of new technologies are due for prime time this year. Wireless N is in
full swing, enabling corporates a better range on their networks and more
security, while consumers can stream all forms of interesting content over their
home networks. WiMAX is another of those new technologies and this year we will
see it playing an increasingly important role in providing network access to
customers and providing backhaul capability as an alternative to fibre,
especially now that the undersea cables are coming in thick and fast. Another
new technology is USB 3.0 which we will see in isolated environments. This
technology holds the promise, because of its huge capacity (even over wireless),
of finally ridding consumers of the drudgery of deciding which cable plugs
where. Optimally configuring themselves for best audio and video experiences,
this will improve satisfaction and drive repeat sales.
We expect Microsoft Office 2010 to be a huge success - and this is important
since it is Microsoft`s last really big show at an application suite before
things head into the cloud. Office 2010 will be a compelling upgrade as users
have overcome their resistance to the new interface.
2010 will be the year that we as a country get connected properly. The capacity
is coming in the form of undersea cables, local infrastructure issues are being
solved with telecommunication companies being more proactive and of course,
prices are coming right.
11. Company outlook
The company is undertaking a review of the overall structure and operations with
a view to further improving efficiency. The emphasis on increasing volumes
remains a driver of performance across our operations.
The Group 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.
12. 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.
13. 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 Kan Chief Executive Officer
Neels Coetzee Financial Director
26 February 2010
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@mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
Date: 26/02/2010 07:30:01 Produced by the JSE SENS Department.
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