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MST
MST
MST - Mustek Limited - Audited financial results for the
year ended 30 June 2010
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 2010
- Net cash from operations of R230,5 million
- Dividend of 12 cents per share
- Headline earnings per share up 19%
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2010 2009
R 000 R 000
Revenue 3 409 515 3 481 903
Cost of sales (2 923 883) (2 916
547)
Gross profit 485 632 565 356
Other income 20 626 14 858
Distribution, administrative and (378 292) (463 623)
other operating expenses
Profit from operations 127 966 116 591
Investment revenues 15 269 20 800
Finance costs (53 132) (66 051)
Other (losses) and gains (2 480) 2 319
Profit before tax 87 623 73 659
Income tax expense (23 228) (21 224)
Profit for the year 64 395 52 435
Other comprehensive income
Exchange losses on translation of (2 635) (10 818)
foreign operations
Realisation of foreign currency - 1 477
translation reserves
Surplus on revaluation of 22 111 6 605
properties
Realisation of revaluation - (2 351)
surplus on sale of property
Asset revaluation - (8 465)
Other comprehensive income for 19 476 (13 552)
the year, net of tax
Total comprehensive income for 83 871 38 883
the year
Profit attributable to:
Equity holders of the parent 61 374 54 731
Non-controlling interest 3 021 (2 296)
64 395 52 435
Total comprehensive income
attributable to:
Equity holders of the parent 80 781 41 281
Non-controlling interest 3 090 (2 398)
83 871 38 883
Earnings and dividend per share
(cents)
Weighted number of ordinary 110 254 438 110 449
shares in issue 804
Ordinary shares in issue 109 547 165 110 449
804
Basic earnings per ordinary share 55,67 49,55
Diluted basic earnings per 55,67 49,55
ordinary share
Dividend per ordinary share - 10,00 10,00
paid
Dividend per ordinary share - 12,00 10,00
proposed
Headline earnings per share
(cents)
Headline earnings per ordinary 57,79 48,65
share
Diluted headline earnings per 57,79 48,65
ordinary share
Reconciliation between basic and
headline earnings
Basic earnings attributable to 61 374 54 731
equity holders of the parent
Realisation of foreign currency - 1 477
translation reserve
Loss on disposal of subsidiary 1 595 -
Group`s share of loss (profit) on 742 (2 475)
disposal of property, plant and
equipment
Headline earnings 63 711 53 733
Net asset value per share (cents) 594,11 527,12
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2010 2009
R 000 R 000
ASSETS
Non-current assets
Property, plant and equipment 182 499 171 616
Intangible assets 72 114 64 667
Investments in associates 6 364 5 708
Other investments and loans 36 009 34 324
Deferred tax assets 21 545 24 044
Non-current trade and other 2 619 15 652
receivables
321 150 316 011
Current assets
Inventories 574 479 652 115
Trade and other receivables 591 200 518 524
Foreign currency assets 2 057 1 604
Tax assets 12 884 2 890
Bank balances and cash 259 953 338 605
1 440 573 1 513 738
TOTAL ASSETS 1 761 723 1 829 749
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 877 884
Ordinary share premium 122 484 123 583
Retained earnings 497 623 447 294
Properties revaluation reserve 34 159 12 048
Foreign currency translation (4 309) (1 605)
reserve
Equity attributable to equity 650 834 582 204
holders of the parent
Non-controlling interest 24 552 18 488
Total equity 675 386 600 692
Non-current liabilities
Long-term borrowings 132 514 305 616
Deferred tax liabilities 8 373 3 550
140 887 309 166
Current liabilities
Short-term borrowings 77 518 115 138
Trade and other payables 732 538 628 833
Provisions 15 056 15 448
Foreign currency liabilities 161 36 846
Deferred income 20 507 26 034
Tax liabilities 13 847 6 818
Bank overdrafts 85 823 90 774
945 450 919 891
Total liabilities 1 086 337 1 229 057
TOTAL EQUITY AND LIABILITIES 1 761 723 1 829 749
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
2010 2009
R 000 R 000
Operating activities
Cash receipts from customers 3 353 070 3 472 696
Cash paid to suppliers and (3 122 (3 461
employees 539) 717)
Net cash from operations 230 531 10 979
Interest received 14 553 11 504
Finance costs paid (53 132) (66 051)
Dividends received 716 1 748
Dividends paid (11 045) (11 045)
Income taxes paid (22 229) (35 642)
Net cash from (used in) operating 159 394 (88 507)
activities
Net cash used in investing (23 062) (30 986)
activities
Net cash (used in) from financing (214 984) 37 995
activities
Net decrease in cash and cash (78 652) (81 498)
equivalents
Cash and cash equivalents at 338 605 420 103
beginning of the year
Cash and cash equivalents at end 259 953 338 605
of the year
CONSOLIDATED SEGMENT ANALYSIS
Total Mustek
2010 2009 2010 2009
Business segments R 000 R 000 R 000 R 000
Revenue 3 409 3 481 1 586 1 746
515 903 923 463
EBITDA* 154 513 142 479 84 979 78 585
Depreciation and (26 547) (25 888) (15 466) (15
amortisation 281)
Profit (loss) 127 966 116 591 69 513 63 304
from operations
Investment 15 269 20 800 18 459 24 736
revenues
Finance costs (53 132) (66 051) (32 246) (36
241)
Other (losses) (2 480) 2 319 - 1 916
and gains
Profit (loss) 87 623 73 659 55 726 53 715
before tax
Income tax (23 228) (21 224) (17 110) (15
(expense) benefit 537)
Profit (loss) for 64 395 52 435 38 616 38 178
the period
Attributable to:
Equity holders of 61 374 54 731 38 547 40 208
the parent
Non-controlling 3 021 (2 296) 69 (2 030)
interest
64 395 52 435 38 616 38 178
*Earnings before interest, taxation, depreciation and
amortisation
CONSOLIDATED SEGMENT ANALYSIS
Rectron Comztek
2010 2009 2010 2009
Business segments R 000 R 000 R 000 R 000
Revenue 1 482 1 367 394 981 428 964
928 947
EBITDA* 68 846 72 417 10 593 14 917
Depreciation and (9 381) (9 423) (1 700) (1 184)
amortisation
Profit (loss) 59 465 62 994 8 893 13 733
from operations
Investment 5 374 2 031 1 265 1 106
revenues
Finance costs (13 484) (20 993) (6 103) (7 946)
Other (losses) - - - (4 718)
and gains
Profit (loss) 51 355 44 032 4 055 2 175
before tax
Income tax (12 729) (13 069) 28 (1 240)
(expense) benefit
Profit (loss) for 38 626 30 963 4 083 935
the period
Attributable to:
Equity holders of 35 440 32 159 4 317 5
the parent
Non-controlling 3 186 (1 196) (234) 930
interest
38 626 30 963 4 083 935
*Earnings before interest, taxation, depreciation and
amortisation
CONSOLIDATED SEGMENT ANALYSIS
Group Eliminations
2010 2009 2010 2009
Business R 000 R 000 R 000 R 000
segments
Revenue - - (55 317) (61
471)
EBITDA* (9 905) (23 - -
440)
Depreciation and - - - -
amortisation
Profit (loss) (9 905) (23 - -
from operations 440)
Investment 563 8 854 (10 392) (15
revenues 927)
Finance costs (11 691) (16 10 392 15 927
798)
Other (losses) (2 480) 5 121 -
and gains
Profit (loss) (23 513) (26 - -
before tax 263)
Income tax 6 583 8 622 - -
(expense)
benefit
Profit (loss) (16 930) (17 - -
for the period 641)
Attributable to:
Equity holders (16 930) (17 - -
of the parent 641)
Non-controlling - - - -
interest
(16 930) (17 - -
641)
*Earnings before interest, taxation, depreciation and
amortisation
Total
2010 2009
Geographical R 000 R 000
segments
Revenue 3 409 3 481
515 903
Profit (loss) 87 623 73 659
before tax
Income tax (23 228) (21
(expense) 224)
benefit
Profit (loss) 64 395 52 435
for the period
Attributable to:
Equity holders 61 374 54 731
of the parent
Non-controlling 3 021 (2 296)
interest
64 395 52 435
South Mecer
Africa East
Africa
2010 2009 2010 2009
Geographical R 000 R 000 R 000 R 000
segments
Revenue 3 181 285 3 238 27 200 25 157
044
Profit (loss) 86 900 75 183 (207) 787
before tax
Income tax (22 944) (20 269 934
(expense) 443)
benefit
Profit (loss) 63 956 54 740 62 1 721
for the period
Attributable to:
Equity holders 62 343 53 928 62 1 721
of the parent
Non-controlling 1 613 812 - -
interest
63 956 54 740 62 1 721
Rectron Comztek
Australia Africa
2010 2009 2010 2009
Geographical R 000 R 000 R 000 R 000
segments
Revenue 121 937 134 405 79 093 84 297
Profit (loss) 2 860 (950) (1 930) (1 361)
before tax
Income tax (29) (1 720) (524) 5
(expense)
benefit
Profit (loss) 2 831 (2 670) (2 454) (1 356)
for the period
Attributable to:
Equity holders 1 415 291 (2 446) (1 209)
of the parent
Non-controlling 1 416 (2 961) (8) (147)
interest
2 831 (2 670) (2 454) (1 356)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinar Ordinar Investmen Propertie
y y ts s
share share Retaine revaluati revaluati
d on on
capital premium earning reserve reserve
s
R 000 R 000 R 000 R 000 R 000
Balance at 884 121 403 8 465 7 794
30 June 031 608
2008
Net profit - - 54 731 - -
for the
year
Other - - - (8 465) 4 254
comprehensi
ve income
Recognition - 2 552 - - -
of share-
based
payments
Dividends - - (11 - -
paid 045)
Investment - - - - -
in
subsidiary
Balance at 884 123 447 - 12 048
30 June 583 294
2009
Net profit - - 61 374 - -
for the
year
Other - - - - 22 111
comprehensi
ve income
Recognition - 1 421 - - -
of share-
based
payments
Dividends - - (11 - -
paid 045)
Investment - - - - -
in
subsidiary
Buy back of (7) (2 - - -
ordinary 520)
shares
Balance at 877 122 497 - 34 159
30 June 484 623
2010
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable
Trans- to equity Non-
lation holders of controlling
reserve the parent interest Total
R 000 R 000 R 000 R 000
Balance at 7 634 549 416 19 408 568
30 June 2008 824
Net profit - 54 731 (2 296) 52
for the year 435
Other (9 (13 450) (102) (13
comprehensive 239) 552)
income
Recognition - 2 552 - 2 552
of share-
based
payments
Dividends - (11 045) (613) (11
paid 658)
Investment in - - 2 091 2 091
subsidiary
Balance at (1 582 204 18 488 600
30 June 2009 605) 692
Net profit - 61 374 3 021 64
for the year 395
Other (2 19 407 69 19
comprehensive 704) 476
income
Recognition - 1 421 - 1 421
of share-
based
payments
Dividends - (11 045) - (11
paid 045)
Investment in - - 2 974 2 974
subsidiary
Buy back of - (2 527) - (2
ordinary 527)
shares
Balance at (4 650 834 24 552 675
30 June 2010 309) 386
COMMENTARY
1. Statement of compliance
These condensed financial statements for the year ended 30
June 2010 are a summary of the Group`s unmodified 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 2010 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, except for the amended IAS 1 -
Presentation of Financial Statements, the amended IFRS 7 -
Financial Instruments: Disclosures and IFRS 8 - Operating
Segments which have been adopted for the year ended 30 June
2010.
3. Audit report
The consolidated financial statements for the year have
been audited by Deloitte & Touche and their accompanying
unmodified audit report as well as their unmodified 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 in all material aspects
with the Code on Corporate Governance Practices and Conduct
as contained in the King II Report on Corporate Governance.
The Group has launched initiatives to understand, align with
and incorporate the principles of the King III report into
the operations of the board, management and business.
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
Dr. Len Konar has been appointed as non-executive chairman
in place of Mr. Vuli Cuba who resigned with effect from 16
October 2009. Mr. Ralph Patmore has also been appointed as
non-executive director following the resignation of Mr. Mike
Hennessy with effect from 16 October 2009. Total
remuneration paid to directors for the year under review
amounted to R6,1 million (2009: R5,2 million) and share-
based payments of R0,9 million (2009: R1,6 million) were
expensed relating to directors.
7. Cash flow
A significant reduction in inventory levels and an increase
in trade and other payables resulted in R230,5 million cash
generated from operations (2009: R11,0 million). Cash
generated from the continued drive to further reduce
inventory levels will be used to reduce short-term
borrowings further.
Mustek has also restructured its long-term finance
facilities and were able to repay R207,5 million in long and
short-term liabilities which will lead to significant
interest savings in future. The borrowing powers of the
Group have increased significantly as additional facilities
were advanced by financial institutions.
8. Corporate activities
The Group acquired 100% of Mustek Capital (Pty) Ltd on 1
June 2010 for R100,0 thousand and disposed of Tier One
Electronics (Pty) Ltd on 25 November 2009 for R1,0 million.
9. Operating results
Volumes increased by approximately 13%, but a significantly
stronger average exchange rate of R7,61 to the US dollar
compared to R9,05 in the previous financial year, negatively
affected revenue and led to a 2,1% decrease to R3,410
billion.
A review of the overall structure has identified various
inefficiencies and duplication of functions. Once-off
retrenchment costs of R4,7 million negatively affected
profitability and as the process was only completed towards
the middle of the financial year, the full benefit will only
be achieved in the next financial year. Further benefits
include improved working capital management and an
elimination of inefficiencies and duplication.
Distribution, administrative and other operating expenses
(excluding foreign exchange profits and losses) decreased by
4,4%.
Rectron managed to increase its revenue by 8,4% and
contributed R35,4 million (2009: R32,2 million) to the
Group`s net profit despite tough trading conditions with
technology becoming more commoditised and consumers spending
less. Sound financial management, inventory optimization and
a renewed focus on their customers contributed to their
continued success.
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 provision of internet bandwidth in South Africa has
become a recurring theme. Recently, however, rapid
development in this arena has seen South Africa`s bandwidth
increase to almost parity with the rest of the world, and
early next year, the country will be in a situation where
supply of connectivity per capita will be better than most
developed countries. This is having a stimulatory effect on
the local industry, with ISP`s scrambling to provide
uncapped access to end-users. With the cellular operators`
ability to provide wireless connectivity, plans are already
underway for the launch of 21Mbps and LTE (100Mbps)
connections in the next year which will improve user
experience tremendously. The price pressure this has created
has seen uncapped ADSL being sold at a quarter of the price
it was a year ago. This trend is anticipated to continue,
with the price being halved again. It is also encouraging
that providers are investigating ways of providing this
connectivity to rural communities. Mustek`s experience in
providing computing to schools in these areas will be
invaluable in capitalising on more projects now that
connectivity is feasible and more affordable.
All of these developments have not gone unnoticed by the
content providers, witnessed by the arrival of
www.youtube.co.za, soon to be followed by, inter alia,
iTunes, Amazon and Netflix. These rich media content
providers stimulate the need for hardware, high capacity
hard drives, improved graphics, larger monitors, etc., which
will prove beneficial for Mustek as a hardware vendor.
The desktop PC market remains consistent. Large corporate
buyers remain committed to the platform due to the control
it gives them, a much lower total cost of ownership and
superior performance. Corporates have realised that, to
extend the life of an asset, PC upgrades should be easily
facilitated utilising standard components. Notebooks, apart
from memory and hard drives, use proprietary components,
again increasing the total cost of ownership.
The Teachers Laptop Initiative has recently been launched
and is focused on improving Information and Communications
Technology (ICT) in teaching and learning and aims to ensure
every teacher owns and uses a laptop, by providing them with
a monthly allowance which will cover the purchase costs as
well as the costs of connectivity.
12. Group outlook
The Group is focusing on increasing volumes as it remains a
driver of performance across our operations.
The Group is placing increased focus on working capital
management in order to reduce finance costs further.
Mustek`s outlook remains focused on sustainable growth.
Opportunities for further optimisation, improved production,
further consolidation and cost management will be explored.
Cash flow will be used prudently to further 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. To this end, the
final dividend declared by the Board of Directors for the
financial year ended 30 June 2010 has been increased to 12
cents per share.
Notice is hereby given that a final dividend of 12 cents per
ordinary share for the year ended 30 June 2010 is 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 dividend Friday, 1 October 2010
First day to trade ex dividend Monday, 4 October 2010
Record date Friday, 8 October 2010
Payment date Monday, 11 October
2010
No share certificates may be dematerialised or
rematerialised between Monday, 4 October 2010 and Friday, 8
October 2010, 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 Kan Chief Executive Officer Neels Coetzee
Financial Director
30 August 2010
Corporate information:
Company secretary: Neels Coetzee.
Transfer secretaries: Computershare Investor Services (Pty)
Ltd.
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@mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
www.mustek.co.za
Date: 30/08/2010 07:05:01 Produced by the JSE SENS Department.
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