| Mon 12 Mar 2001, 0:00 | | Mustek - Financial Results For The Six Months Ende |
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MUSTEK LIMITED
* Revenue increases
* Profit from operations increases
* Realisation from investment portfolio
Group Income Statement
Unaudited Unaudited Audited
Mustek Group Mustek Group Mustek Group
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
Revenue 973 455 720 958 1 552 763
Cost of sales (821 950) (605 482) (1 286 018)
Gross profit 151 505 115 476 266 745
Operating expenses (89 359) (60 907) (164 931)
Profit from operations 62 146 54 569 101 814
Finance costs (19 501) (6 971) (27 278)
Core business (12 427) (6 971) (19 993)
Technology investments (7 074) - (7 285)
Non-operating income (loss) 3 661 6 641 (8 534)
Income from investments 5 992 3 498 8 265
Exceptional item 11 133 3 143 (7 049)
Carrying value adjustment to investments
and loans (13 464) - (9 750)
Profit before tax 46 306 54 239 66 002
Income tax expense (13 042) (10 220) (21 739)
Profit after tax 33 264 44 019 44 263
Share of associate company's income - 4 330 12 628
Amortisation of Goodwill (7 800) (7 361) (44 722)
Outside shareholders interest (5 825) - -
Net profit for the period 19 639 40 988 12 169
Headline earnings per share (refer note 4)
Continued core business 41.23 45.68 89.09
Discontinued operations - 0.20 (6.86)
Training operations (1.92) (1.62) (2.61)
Networking distribution (2.50) 0.94 (0.94)
Technology investments (7.04) - (7.28)
29.77 45.20 71.40
Earnings per share (refer note 4) 19.62 40.96 12.16
Net asset value per share 335.02 347.12 315.50
Gross profit margin 15.56% 16.02% 17.18%
Gross operating profit margin 6.38% 7.57% 6.56%
Weighted average number of shares 100 114 533 100 071 533 100 085 866
Group Balance
Sheet
Unaudited Unaudited Audited
Mustek Group Mustek Group Mustek Group
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
ASSETS
Non-current assets 147 450 195 007 188 861
Plant and equipment 37 024 28 036 30 934
Goodwill 24 477 29 084 22 878
Investments in associates 45 871 60 495 85 127
Other investments and loans 34 827 76 570 44 723
Deferred tax asset 5 251 822 5 199
Current assets 872 213 609 795 653 185
Inventories on hand 270 013 243 507 253 748
Inventories on hand-Rectron 129 317 - -
Inventory in transit 37 991 23 300 14 775
Trade and other receivables 270 483 317 701 278 268
Trade and other receivables-Rectron 81 395 - -
Taxation - - 2 119
Bank balances and cash 78 430 25 287 104 275
Bank balances and cash-Rectron 4 584 - -
TOTAL ASSETS 1 019 663 804 802 842 046
EQUITY AND LIABILITIES
Capital and reserves 335 406 347 366 315 767
Share capital 801 801 801
Share premium 74 968 74 796 74 968
Accumulated profits 214 820 228 905 195 181
Other reserves 44 817 42 864 44 817
Minority interest 35 660 - -
Non-current liabilities 19 868 89 841 25 345
Interest bearing long-term borrowings 16 334 89 841 20 711
Interest free long-term borrowings 3 534 - 3 848
Deferred tax liabilities - - 786
Current liabilities 628 729 367 595 500 934
Trade and other payables 277 675 258 820 223 145
Trade and other payables-Rectron 88 906 - -
Interest bearing short-term borrowings 160 857 1 006 216 616
Interest bearing long-term
borrowings-Rectron 21 716 - -
Interest free short-term borrowings 8 410 - 21 189
Deferred income - - 10 923
Tax liabilities 1 931 2 880 5 960
Bank overdrafts 33 935 104 889 23 101
Bank overdrafts-Rectron 35 299 - -
TOTAL EQUITY AND LIABILITIES 1 019 663 804 802 842 046
Cash Flow Statement
Unaudited Unaudited Audited
Mustek Group Mustek Group Mustek Group
6 months 6 months Year end
31 Dec 2000 31 Dec 1999 30 June 2000
R'000 R'000 R'000
Cash generated by operations 40 882 13 274 89 258
Finance costs paid (19 501) (6 971) (19 748)
Taxation paid (16 761) (23 036) (43 761)
Cash flow from operating activities 4 620 (16 733) 25 749
Cash flow from investing activities (2 370) (125 479) (101 349)
Cash flow from financing activities (23 511) 87 075 162 974
Net cash utilised (21 261) (55 137) 87 374
Cash & cash equivalents at beginning
of period 104 275 (24 465) 16 901
Cash & cash equivalents at end of
period 83 014 (79 602) 104 275
Statement of changes in equity
Ordinary Share Accumulated Other Translation Total
share capital premium profits reserves reserve
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June
1999 801 74 796 221 274 39 721 - 336 592
Change in accounting
policy-adoption AC 131 - - (34 817) - - (34 817)
Restated balance at
30 June 1999 801 74 796 186 457 39 721 - 301 775
Net profit for the year - - 26 891 - - 26 891
Change in accounting
policy-adoption AC 131 - - (14 722) - - (14 722)
Realised profit on
disposal of investments - - (3 445) 3 445 - -
Exchange differences
arising from translation
of foreign entity - - - - 1 651 1 651
Shares issued - 172 - - - 172
Balance at 30 June 2000 801 74 968 195 181 43 166 1 651 315 767
Net profit for the period - - 19 639 - - 19 639
Balance at
31 December 2000 801 74 968 214 820 43 166 1 651 335 406
Notes to the Financial Statements
1. Accounting policies
The new accounting policy for goodwill has been applied in terms of AC 131.
Goodwill is amortised over a three-year period resulting in a prior year
adjustment and re-statement of comparative figures. All the other accounting
policies at 31 December 2000 are consistent with those applied at 30 June 2000.
2. Seasonal sales
Traditionally, Mustek's revenue and profits are generated in a ratio of
approximately 40/60 between first and second six months of each financial year.
However, during the 2000 financial year a radical change occurred, due to Y2K,
resulting in almost the reverse position. It is expected that the traditional
ratio of 40/60 will revert to in this financial year.
3. Segment analysis
Gross Profit Finance cost Headline profit
before tax
R'000 R'000 R'000
Mustek core 85 893 8 020 39 074
Rectron 38 779 1 898 17 903
124 672 9 918 56 977
Brother 8 091 15 3 148
Networking distribution 5 667 403 (2 498)
Training operations 13 075 2 091 (1 917)
Technology investments - 7 074 (7 074)
151 505 19 501 48 636
4. Reconciliation between headline earnings per share and earning per share
- The difference is due to a capital profit on the disposal of an investment
in Sparkle Power International of R11.1 million, carrying value adjustments to
investments and loans of R13.46 million and goodwill of R7.8 million written
off.
- The profit on the disposal of the investment in Sparkle Power International
was as a result of a total consideration of R 18 million paid by overseas
investors.
5. Corporate activities
During the period under review, Mustek acquired an additional 8.7 million
shares in Rectron Holdings Limited; the additional shares increased Mustek
holding to 51.8%, resulting in Rectron becoming a subsidiary and being
consolidated this period. The consolidation resulted in the following increases
in working capital:
1. Inventories of R129.3 million;
2. Trade and other receivables of R81.4 million;
3. Trade and other payables of R88.9 million;
4. Bank balances and cash of R4.6 million;
5. Bank overdrafts and loans of R56.9 million.
6. Review of trading results
- Revenues increased by 35% to R974 million after consolidating Rectron,
reflecting continued demand for PC's, components, services and peripheral IT
products.
- Gross and operating margins were lower due to tough trading conditions with
lower volumes experienced by the IT industry generally. The mix of margin on
contract deliveries also had an effect.
- Increase in revenue due to renewed demand and improved efficiencies in
Mustek's assembly and delivery infrastructure, tight control over costs and
overheads will result in margins improving to year-end. Management embarked on
a cost reduction exercise from November 2000, the benefits of which have been
experienced immediately and will continue into the future.
- Headline earnings per share were down from last year, mainly because of
finance costs on investment portfolio, exceptional sales and profits prior to
Y2K, an increase in the effective tax rate and certain under-performing
subsidiaries.
- The financial gearing of the group is receiving the focus of the Board and
has shown a substantial improvement from 30 June 2000, excluding the effect of
the consolidation of Rectron. The debt equity ratio, excluding Rectron and
before application of the new accounting policy for goodwill, equals
approximately 36% from 43% at year-end.
- The Board is focused on improving financial gearing through better working
capital management, further disposal of a part of the technology investment
portfolio and discontinuing under-performing subsidiaries.
- The exceptional item comprises the profit on disposal of a technology
investment (Sparkle Power International) during November 2000.
7. Core business
- Mustek Electronics Divisions' own-brand Mecer continued to dominate the
South African P C market for the ninth consecutive year. The BMI Technology
report showed Mecer's market share for quarter 3 and quarter 4 2000 being 16.2%
and 19% respectively with our nearest competitor being foreign brands at
between 8 - 9%.
- Mecer Corporate Divisions' strategy of developing and nurturing existing
relationships with value added resellers and business partners is bearing
fruit. The announcement of some lucrative contracts being awarded to Mustek is
imminent.
- Rectron Holdings Limited's results show a consistent trend of steadily
increasing growth in both revenue and profit. Rectron showed after tax profit
of R12 million, representing a 20% increase over the corresponding period last
year. This performance bucks the current trend in the local IT industry.
- Brother Business Machines continued to report pleasing levels of
profitability. Brother will continue to benefit in the remaining six months
from the current government supply contracts, which run for another eighteen
months.
8. Focus
The PC/information device and services market remains the strategic focus area
for the Mustek group with the manufacture and delivery of its own-brand Mecer
products. Mustek will continue to differentiate its leading brand products by
adding support services and developing value added delivery channels to grow
its core business in Southern Africa, Sub-Saharan Africa and internationally.
9. Future prospects
The continuing success and growth of the business of Mustek depends
on us:
- Providing the channel and the end-user with added value services;
- Growth in the large corporate and public market sectors;
- Export products to neighboring territories;
- Increasing market share by delivering a quality product at a more
competitive price (while maintaining margins) backed up by support and service
of international standard and quality;
- Utilising our expertise of trading and competing in an emerging economy and
growing our company and brand in similar markets;
- Actively managing our investment portfolio to generate wealth for all our
stakeholders;
- Maintaining and improving our margins by better and more efficient
utilisation of existing infrastructure, improved working capital, management
and focusing on our core competencies and products;
The global PC demand appears to be slowing down, the growth in developing area
is still positive and will remain positive in our view for at least the next
five years. In the short term, an improvement can be expected due to, firstly,
the Giga Hertz era and secondly, the release of Windows XP (Whistler) during
quarter 3 of 2001 and renewed demand from the corporate sector and public
development programs.
10. Dividends
No interim dividends will be paid.
11. Directors
- Hein Engelbrecht and Dan Kramer were appointed as directors
on 1 September 2000 to strengthen the executive team.
- Dr. Duarte da Silva resigned as a non-executive director on 27 February 2001
due to his commitment to Peregrine.
12. STRATE
Mustek Limited has been notified by the JSE Securities Exchange to transfer the
company's share capital to the electronic STRATE "Share Transactions Totally
Electronic" environment as from 7 May 2001. This is the date from which
investors' shares can be converted into an electronic record in order to become
eligible to settle in the STRATE environment. Trading for electronic
settlement begins on 28 May 2001 and from this date there is a legal
requirement for investors to deposit their shares with a CSDP or qualifying
stockbroker prior to selling them in order for the trade to settle in STRATE.
Thus, with effect from 28 May 2001 investors will not be able to sell Mustek
Limited shares unless they exist in electronic format in the STRATE
environment. Electronic settlement of trades in Mustek Limited shares will
take place for the first time on
4 June 2001. Investors are urged to convert their shares to the STRATE
environment in the interests of efficiency and security.
Any queries shareholders may have should be referred to STRATE on
0800 004 727.
13. Website
For more information on the Group and our products, visit our website at
www.mustek.co.za or email at ltd@jhb.mustek.co.za.
14. Corporate information
Company Secretary Transfer Secretary
A. Girdlestone Mercantile Registrars
8th Floor
11 Diagonal Street
Johannesburg
2001
Registered Office Postal Address
322 15th Road P.O. Box 1638
Randjespark Parklands
Midrand 2121
On behalf of the Board
David C. Kan
Michael F. Hennessy
12 March 2001
PRESS RELEASE
Mustek reflects an increase in revenue of 35%, invests for core business growth
JSE Securities Exchange-listed Mustek Limited has reported a 35% revenues
increase after consolidating Rectron for the six month period ending 31
December 2000 to R974 million, and profit from operations increasing from R54,6
million to R62,1 million. Gross and operating margins were lower due to
difficult trading conditions with slower growth experienced by the IT industry
generally. This is the ninth consecutive year that Mustek has shown growth in
revenues and profit, bucking the downward trend of international PC brands.
Mustek's Mecer computer brand commands the leading position in South Africa,
with an 18% market share for the period reviewed.
The company expects revenue and profit ratio for this financial year to revert
to 40/60 between the first and second six months, after a reversal of the trend
during the 2000 financial year.
Mustek increased its shareholding in JSE Securities-listed components solutions
distributor Rectron to 51.8%, resulting in Rectron's consolidation in this
period while equity accounted for in the previous period.
During the period under review Mustek continued to focus its efforts on
increasing market share, disposing of some investments and eliminating gearing
on others. Mustek's assembly and delivery infrastructure efficiencies have been
improved, and tight control over costs and overheads has been exercised. In
this way Mustek expects margins to improve in the second six months
Financial gearing has improved through better working capital management,
disposal of a part of the technology investment portfolio and discontinuing
under-performing subsidiaries. Mustek disposed of Sparkle Power International,
one of its investments, realising a capital profit of R11.1 million. Excluding
Rectron and before applying the new accounting policy for amortising goodwill,
gearing has dropped to 36% from 43%.
"There is no replacement for the PC in the immediate future, " says CEO David
Kan. "PCs cannot be matched for functionality and performance by personal
digital assistants, thin client architectures or other single-task devices. The
Mecer brand is gaining wider acceptance in the corporate and government
sectors, where we are fulfilling major contracts won, "Our market share in
South Africa has grown from 17% in Q3 to 19% in Q4, and we expect 20% for 2000,
with a long-term target of 30% for 2002."
The prospects for Mustek's core Mecer brand are positive, says Kan. "South
Africa is not a mature market, and there is still room for organic growth.
Mecer is now tapping strongly into the traditional tier 1 marketplace which was
previously dominated by international brands. Our expansion into Africa has
been successful. The Gartner Group reported earlier this year that 95% of
computing infrastructure for the new economy has yet to be built or sold. This,
coupled with the demand for technology enhancements will ensure a steady demand
for PCs well into the future."
(ends)
For further information contact:
David Kan, Mustek Limited : (011) 237-1000
Angela Gordon, Priorities : Tel 011-608-1700 or 083-458-8126
Angela Gordon
Account Manager
Priorities, P.O. Box 3335 Edenvale, Johannesburg 1610
Telephone : 27-11-608-1700 Fax : 27-11-608-1712
Cell : 082-458-8126
