| Tue 4 Sep 2001, 0:00 | | Mustek Limited Financial Results For The Year Ende |
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Share Code : MST
ISIN Code : ZAE000012373
Mustek Limited
2001 2000
R'000 R'000
Revenue 2 127 241 1 552 763
Cost of sales (1 791 (1 286 018)
205)
Gross profit 336 036 266 745
Operating expenses (201 834) (164 931)
Operating income before goodwill 134 202 101 814
amortisation
Goodwill amortisation (25 203) (44 722)
Profit from operations 108 999 57 092
Net finance costs (33 829) (19 748)
- Interest paid (46 755) (27 278)
Interest received 12 926 7 530
Exceptional items (13 612) (16 064)
Income from associates - 12 628
Profit before taxation 61 558 33 908
Taxation (34 030) (21 739)
Profit after tax 27 528 12 169
Minority interest (9 012) -
Net profit for the year 18 516 12 169
Earnings per share (cents)
Weighted average number of 100 114 100 085 866
ordinary shares in issue 533
Headline earnings per ordinary 55,98 71,40
share (cents)
Earnings per ordinary share 18,49 12,16
(cents)
CONSOLIDATED BALANCE SHEET
2001 2000
R'000 R'000
ASSETS
Non-current assets 177 115 188 861
Property, plant and equipment 39 252 30 934
Goodwill 11 247 22 878
Development costs 7 506 -
Investments in associates 60 063 85 127
Other investments and loans 41 804 44 723
Deferred tax asset 17 243 5 199
Current assets 819 357 653 185
Inventories on hand 313 375 253 748
Inventories in transit 47 149 14 775
Trade and other receivables 349 417 278 268
Taxation 33 2 119
Bank balances and cash 109 383 104 275
TOTAL ASSETS 996 472 842 046
2001 2000
R'000 R'000
EQUITY AND LIABILITIES
Capital and reserves 327 053 315 767
Share capital 801 801
Share premium 74 968 74 968
Accumulated profits 205 194 195 181
Other reserves 46 090 44 817
Outside shareholders 38 914 -
interest
Non-current liabilities 10 585 25 345
Interest bearing long-term 9 544 20 711
borrowings
Interest free long-term 313 3 848
borrowings
Deferred tax liabilities 728 786
Current liabilities 619 920 500 934
Trade and other payables 411 845 223 145
Interest bearing short- 136 608 216 616
term borrowings
Interest free short-term 5 034 21 189
borrowings
Deferred income 2 538 10 923
Tax liabilities 24 515 5 960
Bank overdrafts 39 380 23 101
TOTAL EQUITY AND 996 472 842 046
LIABILITIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Share Accumulated Other
share premium profits reserves+
capital R'000 R'000 R'000
R'000
Balance at 801 74 796 221 274 39 721
30 June 1999 as
previously shown
Change in - - (34 817) -
accounting
policy
Restated balance 801 74 796 186 457 39 721
at 30 June 1999
Net profit for - - 12 169 -
the year
Realised profits - - (3 445) 3 445
on disposal of
investments
Foreign currency - - - -
translation
reserve foreign
entity
Shares issued - 172 - -
Balance at 30 801 74 968 195 181 43 166
June 2000
Net profit for - - 18 516 -
the year
Realised profits - - (8 503) 8 503
on disposal of
investments
Net foreign - - - -
currency
translation
reserve of
foreign entity
Balance at 30 801 74 968 205 194 51 669
June 2001
Translat Total
ion R'000
reserves
R'000
Balance at - 336 592
30 June 1999 as
previously shown
Change in - (34 817)
accounting
policy
Restated balance - 301 775
at 30 June 1999
Net profit for - 12 169
the year
Realised profits - -
on disposal of
investments
Foreign currency 1 651 1 651
translation
reserve foreign
entity
Shares issued - 172
Balance at 30 1 651 315 767
June 2000
Net profit for - 18 516
the year
Realised profits - -
on disposal of
investments
Net foreign (7 230)* (7 230)
currency
translation
reserve of
foreign entity
Balance at 30 (5 579) 327 053
June 2001
+ Other reserves comprise of net realised profits on disposal of
investments.
* Translation reserves include a foreign currency translation reserve for
Zimbabwe amounting to R 7,284 million.
2001 2000
CONSOLIDATED CASH FLOW STATEMENT R'000 R'000
Cash receipts from customers 2 081 769 1 556 825
Cash paid to suppliers and employees (1 875 226) (1 493
515)
Net cash from operations 206 543 63 310
Interest received 12 926 7 530
Finance costs paid (46 755) (27 278)
Dividends received - 25 963
Income taxes paid (24 139) (43 761)
Net cash from operating activities 148 575 25 764
Net cash used in investing activities (29 821) (101 349)
Net cash from financing activities (106 448) 162 974
(Decrease) increase in long-term (16 342) 2 999
borrowings
(Decrease) increase in short-term (97 848) 179 551
borrowings
Proceeds on issue of shares - 172
Increase (decrease) in bank overdrafts 7 742 (19 748)
Net increase in cash and cash 12 306 87 389
equivalents
Cash and cash equivalents at beginning 104 275 16 901
of the year
Effect of foreign exchange rate (7 198) (15)
changes
Cash and cash equivalents at end of 109 383 104 275
the year
Commentary
Accounting policies
The new accounting policy for goodwill has been applied in terms of AC 131.
Goodwill is amortised over a three-year period, unless the board is of the
opinion that a shorter write-off period is required, in which case, this
will result in a prior year adjustment and re-statement of comparative
figures. All the other accounting policies at 30 June 2001 are consistent
with those applied at 30 June 2000.
Segment analysis
Business Segment
Total Mecer Brother
Group
R'000 R'000 Investments R'000
R'000
Revenue 2 127 1 299 454 - 166 227
241
Operating income 134 202 87 892 11 854
(loss) before -
goodwill amortisation
Goodwill amortisation (25 203) - (19 718) -
Profit (loss) from 108 999 87 892 (19 718) 11 854
operations
Net finance (costs) (33 829) (12 299) (14 103) 2 194
income
Finance cost (46 755) (20 361) (14 103) (27)
Interest received 12 926 8 062 - 2 221
Exceptional items (13 612) (1284) (7649) (1 195)
Profit (loss) before 61 558 74 309 (41 470) 12 853
taxation
Taxation (34 030) (27 079) - (4 267)
Profit (loss) after 27 528 47 230 (41 470) 8 586
taxation
Minority interest (9 012) - - -
Net profit (loss) for 18 516 47 230 (41 470) 8 586
the year
* Discontinued
Comztek Rectro Mustek Elimination
n Training s
R'000 *
R'000 R'000 R'000
Revenue 129 973 625 36 117 (130 505)
975
Operating income 309 34 293 (147) -
(loss) before
goodwill amortisation
Goodwill amortisation (4 530) - (955) -
Profit (loss) from (4 220) 34 293 (1 102) -
operations
Net finance (costs) (1 196) (4 205) (4 220) -
income
Finance cost (3 082) (4 888) (4 294) -
Interest received 1 886 683 74 -
Exceptional items 94 (814) (2 764) -
Profit (loss) before (5 322) 29 274 (8 086) -
taxation
Taxation (118) (11 8 503 -
069)
Profit (loss) after (5 440) 18 205 417 -
taxation
Minority interest - (9 012) - -
Net profit (loss) for (5 440) 9 193 417 -
the year
Mecer geographical Total South Zimbabwe Elimination
segment R'000 Africa R'000 s
R'000 R'000
Revenue 1 299 454 1 343 34 617 (78 745)
582
Profit from 87 892 82 224 5 668 -
operations
Net finance (costs) (12 299) (14 151) 1 852 -
income
Finance cost (20 361) (20 193) (168) -
Interest received 8 062 6 042 2 020 -
Exceptional items (1 284) - (1 284) -
Profit before 74 309 68 073 6 236 -
taxation
Taxation (27 079) (22 565) (4 514) -
Profit after taxation 47 230 45 508 1 722 -
Reconciliation between headline earnings per share and earnings per share
2001 2000
Earnings per Share (cents) Headline Headlin Adjustm Basic
e ents
Continued core business 69,91 (24,22) 45,69 89,64 (14,71) 74,93
Discontinued operations - - - (6,86) - (6,86)
Mustek training 1,44 (0,96) 0,48 (2,61) (29,97) (32,58
operations*
Technology investments (14,09) - (14,09) (7,28) - (7,28)
Exceptional items (1,28) (12,31) (13,60) (1,49) (14,56) (16,05
55,98 (37,49) 18,49 71,40 (59,24) 12,16
* Discontinued
Corporate activities
In line with our strategic decision to focus on our core business
Mustek increased its holding in Rectron Holdings Limited to 51.8%, resulting
in Rectron becoming a subsidiary and being consolidated for this period.
Comztek acquired the business of Lan Design on 1 March 2001.This resulted in
Comztek gaining critical mass and returning an operating profit of R1.5
million for the last three months of the period under review.
Mustek disposed of its investment in Sparkle Power International for R18
million resulting in a capital profit of R9.3 million.
Mustek disposed of its interest in Mustek Training and Development Group
(Pty) Limited (formerly Torque Training (Pty) Ltd), which under performed
for the last two years.
Review of trading results
Gearing
The financial gearing of the group has shown substantial improvement. The
net debt equity ratio has been reduced to 23% from 49% at the previous year-
end.
Net cash from operations of R206 million.
R114 million of long and short-term borrowings repaid.
Profitability
Group revenues increased by 37% to R2.127 billion.
Gross profit and operating profit margins were down due to tough trading
conditions, the consolidation of Rectron, hyper-inflation accounting of
Zimbabwe and the mix of margin on initial period contract deliveries.
Margins are expected to improve in the year ahead through increased demand
and improved efficiencies in Mustek's manufacturing and delivery
infrastructure and continued cost reduction.
Net finance costs are disclosed in detail in the segment analysis.
Substantial improvements in working capital management were achieved in
Mecer, Brother Business Machines and Rectron. In analysing the figures we
highlight the consolidation of Rectron, the acquisition of Lan Design by
Comztek, the first full year interest on the investment portfolio and the
disposal of Mustek Training Group.
Exceptional items consist of capital profit on disposal of an investment,
impairment of the investment in Lithatek Investments, loss on monetary
position in Zimbabwe, once-off expenses written off and non-core investment
loans impaired.
Headline earnings per share were down from last year due to the finance
costs incurred in the investment portfolio, an increase in effective
taxation rate, the effect of hyper-inflation accounting for Mustek Zimbabwe
and losses incurred by Rectron in its international operations.
Mustek Zimbabwe's decline in profit and net asset value is attributable to
the weakening economic climate in Zimbabwe, political instability and the
subsequent hyper-inflation accounting of its results. Mustek continues to
find this a profitable channel and will continue doing business as long as
it remains so.
Core business
Mustek's leading Mecer brand continued to dominate the Southern African PC
market for the tenth consecutive year. The BMI-T PC market report showed
Mecer's market share for the first six months at 20.5% with the nearest
competitor being a foreign brand at 8%. Mecer's strategic objective is to
capture 30% of the Southern African market share by 2003.
Mustek is committed to creating and maintaining an environment that provides
equal opportunities to all its employees, with special consideration for
historically disadvantaged groups or previously disadvantaged individuals.
Mustek has in place strong Black Economic Empowerment initiatives, which
have created opportunities for black small, medium and micro-enterprises
within the IT supply industry.
Mecer Corporate Division's strong corporate and public market strategy has
resulted in large multi-million Rand deals being signed with Eskom,
Spoornet, Sage and Momentum Life. The benefits of these contracts will only
be experienced in the new financial year. This area of the market will
continue to be a strong focus for the company going forward.
Rectron's results show a consistent trend of organic growth in both revenue
and profit in addition to eliminating gearing at year-end. The group's South
African business delivered impressive results with profit from operations up
36% to R39 million and revenue up by 16% to R512 million.
Brother Business Machines continued to report consistent levels of
profitability. Brother will continue to benefit from the current government
supply contracts, which run for another eighteen months. Impressive working
capital management has seen Brother accumulate a substantial positive cash
balance at year-end.
Focus
Mustek aims to maintain and extend its dominant position in the Southern
African PC market and to increase its exports. This will be achieved through
its focus on its core business, the manufacture and distribution of its
Mecer brand, the distribution of complementary international brand
peripheral products and by expanding its role as a facilitator of
information and communication, thus achieving growth and wealth for its
shareholders.
In line with this strategy and to achieve maximum benefit of the brand name,
Mustek will brand its operating divisions: Mecer Gauteng, Mecer Western
Cape, Mecer Eastern Cape and Mecer Kwa-Zulu Natal.
The Board is committed to further improving financial gearing through
working capital management, further disposal of a part of the technology
investment portfolio and discontinuing under-performing and non-core
subsidiaries.
Future prospects
PC demand and growth in Southern Africa continues, despite global demand
having slowed over the past year. In the short term an increased demand can
be expected due to the Intel Pentium 4 Gigahertz era and the release of
Microsoft Windows XP (Whistler) during quarter 3 of 2001 and increased
demand from the corporate sector and public development initiatives.
The continuing success and growth of the business of Mustek will be achieved
by:
Providing the channel with added value services;
Maintaining our existing market and expanding into the large corporate and
public market sectors;
Exporting products to Africa;
Delivering a quality product backed by quality support and service of
international standards;
More efficient utilisation of existing infrastructure, improved working
capital management and focusing on our core competencies and products;
Additional trade finance facilities made available to Mustek by an
international trade finance house will ensure that our working capital cycle
will be better matched in the future to reduce the risks associated with
short term facilities and borrowings.
Dividends
No dividends have been declared or paid for the year under review
10.Directors
Mike Hennessy resigned as executive director with effect from 3 September
2001 and was appointed as a non-executive director with effect from the same
date.
Chris Wood resigned as a non-executive director with effect from 3 September
2001.
The board wishes to thank the above individuals for their contributions over
the last couple of years in shaping the Mustek group into the market leader
it is today, and wish them all the best and success in the future.
11. STRATE
Trading for electronic settlement began on 28 May 2001 and from this date
there was a legal requirement for investors to deposit their shares with a
CSDP or qualifying stockbroker prior to selling them in order to settle in
STRATE. With effect from 28 May 2001 investors were not able to sell Mustek
shares unless they existed in electronic format. Electronic settlement of
trades in Mustek shares took 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.
12 Web site
For more information on the Group and our products and services, visit our
Web site at www.mustek.co.za or www.mecer.co.za or e-mail at
ltd@jhb.mustek.co.za.
13 Corporate information
Company Secretary Transfer Secretary
A. Girdlestone Mercantile Registrars Limited
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 of Directors
David C Kan
CEO
Hein Engelbrecht
Financial Director
4 September 2001
