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MST
MST
MST - Mustek Limited - Condensed consolidated statement of comprehensive income
Mustek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST ISIN: ZAE000012373
("Mustek" or "the Group")
Abridged unaudited financial results for the six months ended
31 December 2011
- Revenue up 21%
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Reviewed Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2011 2010 2011
R000 R000 R000
Revenue 1 963 840 1 624 807 3 506 373
Cost of sales (1 675 714) (1 391 629) (2 990 485)
Gross profit 288 126 233 178 515 888
Other income 13 727 6 484 2 282
Forex (loss) profit (62 865) 14 650 21 793
Distribution, (196 159) (191 050) (384 826)
administrative and other
operating expenses
Profit from operations 42 829 63 262 155 137
Investment revenues 2 916 3 390 7 302
Finance costs (14 844) (14 869) (28 627)
Other losses - - (1 413)
Share of profit of 155 - 263
associates
Profit before tax 31 056 51 783 132 662
Income tax expense (8 285) (10 642) (36 624)
Profit for the period 22 771 41 141 96 038
Other comprehensive income
Exchange profits/(losses) 9 707 (1 233) (3 884)
on translation of foreign
operations
Other comprehensive income 9 707 (1 233) (3 884)
for the year, net of tax
Total comprehensive income 32 478 39 908 92 154
for the year
Profit attributable to:
Equity holders of the 23 010 39 572 94 623
parent
Non-controlling interest (239) 1 569 1 415
22 771 41 141 96 038
Total comprehensive income
attributable to:
Equity holders of the 30 969 38 339 90 733
parent
Non-controlling interest 1 509 1 569 1 421
32 478 39 908 92 154
Earnings and dividend per
share (cents)
Weighted number of 108 849 109 547 165 109 547
ordinary shares in issue 751 165
Ordinary shares in issue 108 677 165 109 547 165 109 547 165
Basic earnings per 21,14 36,12 86,38
ordinary share
Diluted basic earnings per 21,14 36,12 86,38
ordinary share
Dividend per ordinary 17,00 12,00 12,00
share - paid
Headline earnings per
share (cents)
Headline earnings per 13,40 36,20 89,39
ordinary share
Diluted headline earnings 13,40 36,20 89,39
per ordinary share
Reconciliation between
basic and headline
earnings
Basic earnings 23 010 39 572 94 623
attributable to equity
holders of the parent
Group`s share of (profit) (8 427) 82 1 672
loss on disposal of
property, plant and
equipment
Impairment of distribution - - 1 757
right
Impairment of associate - - 2 036
and other loans
Foreign exchange gain on - - (2 167)
liquidation of foreign
subsidiary
Headline earnings 14 583 39 654 97 921
Net asset value per share 645,72 586,74 633,27
(cents)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Reviewed Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2011 2010 2011
R000 R000 R000
ASSETS
Non-current assets
Property, plant and equipment 156 408 137 781 128 333
Intangible assets 67 753 73 469 67 813
Investments in associates 10 207 7 706 8 589
Other investments and loans 32 053 34 909 33 588
Deferred tax asset 23 185 20 370 23 925
Non-current trade and other - 69 -
receivables
289 606 274 304 262 248
Current assets
Inventories 737 267 586 647 646 023
Trade and other receivables 841 430 579 979 556 134
Foreign currency assets 7 505 1 197 1 620
Tax assets 8 819 4 899 7 727
Bank balances and cash 159 253 166 577 195 787
1 754 274 1 339 299 1 407 291
TOTAL ASSETS 2 043 880 1 613 603 1 669 539
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 870 877 877
Ordinary share premium 118 495 122 850 122 823
Retained earnings 582 483 519 244 576 181
Non-distributable reserve 810 4 116 2 725
Foreign currency translation (913) (4 329) (8 872)
reserve
Equity attributable to equity 701 745 642 758 693 734
holders of the parent
Non-controlling interest 20 449 25 615 18 940
Total equity 722 194 668 373 712 674
Non-current liabilities
Long-term borrowings 320 360 106 374 86 598
Deferred tax liabilities 4 787 3 568 5 243
325 147 109 942 91 841
Current liabilities
Short-term borrowings 1 110 117 230 58 741
Trade and other payables 778 169 522 686 723 604
Provisions 11 439 11 040 21 244
Foreign currency liabilities 4 097 21 961 2 185
Deferred income 29 967 19 306 22 479
Tax liabilities 7 157 8 261 5 066
Bank overdrafts 164 600 134 804 31 705
996 539 835 288 865 024
Total liabilities 1 321 686 945 230 956 865
TOTAL EQUITY AND LIABILITIES 2 043 880 1 613 603 1 669 539
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Reviewed Audited
6 months 6 months Year-end
31 Dec 31 Dec 30 Jun
2011 2010 2011
R000 R000 R000
Operating activities
Cash receipts from 1 678 544 1 638 578 3 531 452
customers
Cash paid to suppliers (1 959 239) (1 755 178) (3 405
and employees 981)
Net cash (used in) from (280 695) (116 600) 125 471
operations
Investment revenues 2 916 3 390 7 302
received
Finance costs paid (14 844) (14 869) (28 627)
Dividends paid (18 623) (13 146) (13 146)
Income taxes paid (6 662) (6 611) (40 507)
Net cash (used in) from (317 908) (147 836) 50 493
operating activities
Net cash used in (23 291) (8 093) (12 749)
investing activities
Net cash from (used in) 304 665 62 553 (101 910)
financing activities
Net decrease in cash and (36 534) (93 376) (64 166)
cash equivalents
Cash and cash equivalents 195 787 259 953 259 953
at beginning of the
period
Cash and cash equivalents 159 253 166 577 195 787
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 2010 877 122 484 492 818
Profit for the period - - 39 572
Other comprehensive income - - -
Recognition of share-based - 366 -
payments
Dividends paid - - (13 146)
Investment in subsidiary - - -
Balance at 31 December 2010 877 122 850 519 244
Profit for the period - - 55 051
Other comprehensive income - - -
Premium on acquisition of - - -
additional shareholding in a
controlled entity
Recognition of share-based - (27) -
payments
Disposal of subsidiary - - -
Realisation of foreign exchange - - 985
gains on liquidation of foreign
subsidiary
Other adjustments - - 901
Balance at 30 June 2011 877 122 823 576 181
Profit for the period - - 23 010
Other comprehensive income - - -
Recognition of share-based - 26 -
payments
Dividends paid - - (18 623)
Realisation of non-distributable - - 1 915
reserve
Buy back of ordinary shares (7) (4 354) -
Balance at 31 December 2011 870 118 495 582 483
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Foreign Attributable
Non-dis- currency to equity
tributable translation holders of
reserve reserve the parent
R000 R000 R000
Balance at 30 June 2010 4 116 (3 096) 617 199
Profit for the period - - 39 572
Other comprehensive income - (1 233) (1 233)
Recognition of share-based - - 366
payments
Dividends paid - - (13 146)
Investment in subsidiary - - -
Balance at 31 December 4 116 (4 329) 642 758
2010
Profit for the period - - 55 051
Other comprehensive income - (2 657) (2 657)
Premium on acquisition of (1 391) - (1 391)
additional shareholding in
a controlled entity
Recognition of share-based - - (27)
payments
Disposal of subsidiary - - -
Realisation of foreign - (985) -
exchange gains on
liquidation of foreign
subsidiary
Other adjustments - (901) -
Balance at 30 June 2011 2 725 (8 872) 693 734
Profit for the period - - 23 010
Other comprehensive income - 7 959 7 959
Recognition of share-based - - 26
payments
Dividends paid - - (18 623)
Realisation of non- (1 915) - -
distributable reserve
Buy back of ordinary - - (4 361)
shares
Balance at 31 December 810 (913) 701 745
2011
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Non-
controlling
interest Total
R000 R000
Balance at 30 June 2010 24 552 641 751
Profit for the period 1 569 41 141
Other comprehensive income - (1 233)
Recognition of share-based payments - 366
Dividends paid - (13 146)
Investment in subsidiary (506) (506)
Balance at 31 December 2010 25 615 668 373
Profit for the period (154) 54 897
Other comprehensive income 6 (2 651)
Premium on acquisition of additional - (1 391)
shareholding in a controlled entity
Recognition of share-based payments - (27)
Disposal of subsidiary (6 527) (6 527)
Realisation of foreign exchange gains on - -
liquidation of foreign subsidiary
Other adjustments - -
Balance at 30 June 2011 18 940 712 674
Profit for the period (239) 22 771
Other comprehensive income 1 748 9 707
Recognition of share-based payments - 26
Dividends paid - (18 623)
Realisation of non-distributable reserve - -
Buy back of ordinary shares - (4 361)
Balance at 31 December 2011 20 449 722 194
CONDENSED SEGMENT ANALYSIS
Total Mustek
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Business segments R000 R000 R000 R000
Revenue 1 963 840 1 624 807 1 106 438 692 283
EBITDA* 54 187 75 614 37 607 36 431
Depreciation and (11 358) (12 352) (5 915) (7 085)
amortisation
Profit (loss) from 42 829 63 262 31 692 29 346
operations
Investment revenues 2 916 3 390 1 563 660
Finance costs (14 844) (14 869) (1 886) (110)
Other gains - - - -
Share of profit of 155 - - -
associates
Profit (loss) before 31 056 51 783 31 369 29 896
tax
Income tax (expense) (8 285) (10 642) (9 361) (5 765)
benefit
Profit (loss) for 22 771 41 141 22 008 24 131
the period
Attributable to:
Equity holders of 23 010 39 572 22 008 24 113
the parent
Minority interest (239) 1 569 - 18
22 771 41 141 22 008 24 131
*Earnings before interest, taxation, depreciation and amortisation.
CONDENSED SEGMENT ANALYSIS (continued)
Rectron Comztek
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Business segments R000 R000 R000 R000
Revenue 681 462 728 499 244 809 236 892
EBITDA* 18 581 35 532 3 392 9 185
Depreciation and (4 098) (4 134) (1 345) (1 133)
amortisation
Profit (loss) from 14 483 31 398 2 047 8 052
operations
Investment revenues 1 485 5 725 3 437 1 615
Finance costs (6 654) (9 613) (6 304) (5 136)
Other gains - - - -
Share of profit of - - - -
associates
Profit (loss) before tax 9 314 27 510 (820) 4 531
Income tax (expense) (1 559) (6 512) 169 (1 208)
benefit
Profit (loss) for the 7 755 20 998 (651) 3 323
period
Attributable to:
Equity holders of the 7 977 19 553 (634) 3 217
parent
Minority interest (222) 1 445 (17) 106
7 755 20 998 (651) 3 323
*Earnings before interest, taxation, depreciation and amortisation.
CONDENSED SEGMENT ANALYSIS (continued)
Group Eliminations
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Business segments R000 R000 R000 R000
Revenue - - (68 869) (32 867)
EBITDA* (5 393) (5 534) - -
Depreciation and - - - -
amortisation
Profit (loss) from (5 393) (5 534) - -
operations
Investment revenues 194 153 (3 763) (4 763)
Finance costs (3 763) (4 773) 3 763 4 763
Other gains - - - -
Share of profit of 155 - - -
associates
Profit (loss) before (8 807) (10 154) - -
tax
Income tax (expense) 2 466 2 843 - -
benefit
Profit (loss) for the (6 341) (7 311) - -
period
Attributable to:
Equity holders of the (6 341) (7 311) - -
parent
Minority interest - - - -
(6 341) (7 311) - -
*Earnings before interest, taxation, depreciation and amortisation.
CONDENSED SEGMENT ANALYSIS (continued)
Total South Africa
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Geographical R000 R000 R000 R000
segments
Revenue 1 963 840 1 624 807 1 823 490 1 505 820
Profit (loss) before 31 056 51 783 30 645 50 359
tax
Income tax (expense) (8 285) (10 642) (7 228) (10 003)
benefit
Profit (loss) for 22 771 41 141 23 417 40 356
the period
Attributable to:
Equity holders of 23 010 39 572 23 430 39 624
the parent
Minority interest (239) 1 569 (13) 733
22 771 41 141 23 417 40 356
CONDENSED SEGMENT ANALYSIS (continued)
Mustek East Africa Rectron Australia
6 months 6 months 6 months 6 months
31 Dec 31 Dec 31 Dec 31 Dec
2011 2010 2011 2010
Geographical R000 R000 R000 R000
segments
Revenue 19 144 10 835 75 015 62 413
Profit (loss) before (248) (490) 90 2 219
tax
Income tax (expense) 74 - (534) (312)
benefit
Profit (loss) for (174) (490) (444) 1 907
the period
Attributable to:
Equity holders of (174) (490) (222) 954
the parent
Minority interest - - (222) 954
(174) (490) (444) 1 907
CONDENSED SEGMENT ANALYSIS (continued)
Comztek Africa
6 months 6 months
31 Dec 31 Dec
2011 2010
Geographical segments R000 R000
Revenue 46 191 45 739
Profit (loss) before tax 569 (305)
Income tax (expense) benefit (597) (327)
Profit (loss) for the period (28) (632)
Attributable to:
Equity holders of the parent (24) (515)
Minority interest (4) (117)
(28) (632)
COMMENTARY
1. Statement of compliance
These abridged financial statements for the six months ended
31 December 2011 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 accounting policies applied in the preparation of these abridged unaudited
financial results, which are based on reasonable judgements and estimates, are
in accordance with IFRS. These are consistent with those applied in the annual
financial statements for the year ended 30 June 2011.
3. Audit report
Neither the consolidated financial results for the six months ended 31 December
2011, 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 King III 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
No changes were made to the board during the period under review. Total
remuneration paid to directors for the six months under review amounted to R3,8
million (31 December 2010: R3,3 million) and no share-based payments (31
December 2010: R0,2 million) were expensed relating to directors.
7. Cash flow
Inventory and receivables increased in line with historic trends while revenue
growth and the weaker Rand also contributed to the R280,1 million cash used in
operations (31 December 2010: R116,6 million). This was funded by our long-term
borrowing facilities and is expected to reverse in the period through to June
2012, in line with historic trends.
8. Operating results
Revenue increased by 20,9% to R1,964 billion (31 December 2010: R1,625 billion)
and the gross profit percentage increased to 14,7% (31 December 2010: 14,4%).
Included in profit from operations is R62,9 million relating to realised and
unrealised foreign exchange losses (31 December 2010: R14,7 million foreign
exchange profits). A significant portion of these losses will be recovered when
the related inventory is sold and by settling certain foreign creditors at lower
levels than the R8,10 used at 31 December 2011 to revalue foreign creditors.
Mustek uses the Rand/USD spot rate at the beginning of each month to determine
its selling prices 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 September 2011, a substantial amount of
inventory is accounted for at lower levels compared to where the Rand has
depreciated to. Accounting standards do 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 be in line with the
volatilities of the Rand.
As a result, Mustek`s headline earnings is 13,40 cents per share (31 December
2010: 36,20 cents per share) and basic earnings is 21,14 cents per share (31
December 2010: 36,12 cents per share).
Mustek grew its revenue by 59,8% after adding new products and a renewed focus
on its customers ensured growth in all sectors. Rectron`s revenue declined
slightly after the departure of its CEO caused uncertainty amongst staff. This
was short-lived and the company has regained its focus, growing its revenue
after the appointment of Lindi Shortt as the new CEO.
Distribution, administrative and other operating expenses (excluding foreign
exchange profits and losses) were well controlled and increased by only 2,7%.
9. Retirement benefit plan
The Mustek Group Retirement Fund is a defined contribution fund and payments to
the plan are expensed 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
Internet connectivity costs - particularly in the mobile arena - continue to
decline in South Africa, lowering the total cost of ownership for notebooks and
desktop computers and driving users to seek more value from their purchases.
As these costs continue to drop, the landscape will become more attractive for
large international content owners and distributors to make their entry, only
increasing the usage case for owning a home computer.
This we believe over the coming six to 12 months will make all-in-one computers
with big screens and high-end components, as well as Ultrabooks, the new
category of ultrathin, super-powerful and power conscious mobile computers, more
attractive to a larger audience of buyers.
The market has also begun paying close attention to the upcoming release of
Microsoft`s Windows 8 operating system. With its intuitive user interface,
support for touch-based input and its cloud centricity, Windows 8 could be the
operating system that finally blurs the line between individuals` professional
and personal lives on the conventional computer.
11. Company outlook
The company 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.
With the addition of Acer and Lenovo to Toshiba and Mecer products over the past
12 months, Mustek has become one of the most preferred distributors for the
local reseller community to do business with. Not only does the company now have
an expanded product portfolio to offer its customers, it is finally in a
position to offer customers increased choice. For customers that have relatively
generic technology requirements, but are not prepared to compromise on quality
there is Acer, Lenovo and Toshiba - three of the world`s top brands - to choose
from. For customers that have more specific requirements and want to exercise a
deeper level of control over their hardware platforms, Mustek can build
configurations to exact customer requirements through the Mecer brand. The
company believes this strategy will serve it well over the coming years.
Mustek`s outlook remains focused on sustainable growth. Opportunities for
further optimisation, improved production, further consolidation and cost
management are being pursued. Enhanced cash flow will be used prudently to
further 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 period end up until the date
of this report that requires adjustment or disclosure.
On behalf of the board of directors
David Kan Neels Coetzee
Chief Executive Officer Financial Director
(preparer of abridged Group results)
29 February 2012
Corporate information: www.mustek.co.za
Company secretary: Neels Coetzee
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107, South Africa.
Telephone: +27 (0) 11 370-5000
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
Date: 29/02/2012 12:00:05 Produced by the JSE SENS Department.
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