| Tue 5 Mar 2002, 0:00 | | Mustek Limited - Results / Rectron Limited - Resul |
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Mustek Limited - Results / Rectron Limited - Results
REVENUE INCREASED BY 27%
EBITDA INCREASED BY 29%
IMPROVED WORKING CAPITAL FUNDING, BENEFITS EARNINGS
HEADLINE EARNINGS UP 28%
Accounting Policies
The accounting policies at 31 December 2001 are consistent with those
applied at 30 June 2001 and is in accordance with South African Generally
Accepted Accounting Practice.
Corporate Activities
In line with our strategic decision, the focus is on our core business.
R160m long-term funding at a fixed rate for 5 years, raised through a
securitisation transaction with a high credit rating.
Mustek and Rectron are currently trading under a cautionary announcement,
the outcome of which is expected to be announced soon.
Consideration is still being given to list Mustek shares as depository
receipts on the Taiwan Stock Exchange.
Review of Trading Results
Profitability
Group revenues increased 27% to R1,240 billion.
Operating expenses increased due to the recognition of unrealised foreign
exchange losses, some of which will be recovered in the six months to
June 2002.
EBITDA up by 29% under tough trading conditions.
Improved working capital management and lower fixed rate funding resulted
in net finance cost being reduced by 10%.
Exceptional items consist of a once-off loss incurred by Rectron, loss on
de-consolidating Torque and a profit on the translation of the net
monetary position of Mecer Zimbabwe.
Headline earnings per share and Adjusted Headline earnings per share, up
by 28% and 40% respectively.
The once-off loss incurred by Rectron was not added back in the
calculation of headline earnings, but was added back in calculating the
adjusted headline earnings figure.
Core Business
Mustek's leading Mecer brand continued to dominate the Southern African
PC market for the tenth consecutive year. Mecer's target is to capture a
30% market share of Southern Africa by 2003.
As a South African and African Continent-focused company, with strong
empowerment credentials and initiatives, we are well positioned to
increase our dominant position within government, parastatals and quasi-
government organisations.
Improved quality and efficiency on our production line, product and after-
sales service, position us to make significant inroads into the large
corporate market, which were traditionally served by foreign brands.
This has resulted in large multi-million rand contracts being awarded to
Mecer that will extend over a number of years.
A number of export initiatives have been implemented by structuring a
focused division and appointing selected dealers in various African
countries, which has resulted in this division contributing approximately
5% of our revenue, with the goal of improving it significantly in the
years ahead.
Our coastal branches showed significant increases in both revenue and
profitability as a result of focused management attention.
Rectron's operating results showed a consistent improvement in both
revenue and profitability.
Mustek's joint venture in Nigeria, Zinox Technologies, has been publicly
endorsed as a preferred supplier to government.
Securitisation
To optimise the cost of capital and reduce the group's costs, the group
secured longer-term fixed rate funding. The securitisation was
implemented during November 2001 and the full benefits will be enjoyed
over the period of the funding.
Mustek Ratings
CA Ratings, an affiliate of Standard & Poor, assigned a Zabb+ long-term
rating to Mustek Limited with a stable outlook.
Future Prospects
Secured fixed rate long-term funding, improved working capital management
and additional trade finance facilities position the group well to
consolidate its dominant position.
The growth in PC demand in Southern Africa and Africa continue to be
positive.
The GautengOnline.com roll out of approximately 62 000 PCs in 2409
schools is expected to start during July 2002. Mecer is the principal
partner in a consortium providing a full technology education solution.
Apart from winning a portion of this contract, the potential spin-off
from this is the penetration into households, which in South Africa is
still very low compared to the rest of the world. The expected increases
will have a very positive effect on the prospects of PC sales in Southern
Africa. The public sector and more specifically, The Department of
Education, both at provincial and national level will potentially be a
big boost for PC sales in Southern Africa over the short-to medium-term.
Strong second half expected from all divisions and subsidiaries.
Dividends
No dividend has been declared for the period under review. This policy
will be reviewed at year-end with the announcement of annual results.
Web Sites
For more information and articles on the group, products and services,
visit our websites at www.mustek.co.za or www.mecer.co.za or email us at
ltd@jhb.mustek.co.za
Post Balance sheet date events
The group is currently involved in discussions with the management of
Brother Business Machines to dispose 30% of the company. If the
transaction is concluded, it is the intention of Mustek to cancel the 2
140 283 shares that were to be issued for the original investment.
Mustek's investment in Comztek reduced to 45% after a disposal to
management and the issue of new shares to that company's staff incentive
trust.
Company Secretary Transfer Secretary
Debbie Tam Mercantile Registrars Limited
8th Floor
11 Diagonal Street
Johannesburg
2001
Registered Address Postal Address
322 15th Road P.O. Box 1638
Randjespark Parklands
Midrand 2121
On behalf of the Board of Directors.
David Kan Hein Engelbrecht
Chief Executive Officer Financial Director
5 March 2002
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2001
Consolidated income statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2001 31 Dec 2000 30 Jun 2001
R 000 R 000 R 000
Revenue 1,240,028 973,455 2,127,241
Cost of sales -1,022,745 -821,950 -1,791,205
Gross profit 217,283 151,505 336,036
Operating expenses -128,244 -82,650 -185,530
EBITDA 89,039 68,855 150,506
Goodwill amortisa- -1,929 -7,800 -25,203
tion
Deprecia-tion -6,719 -6,709 -16,304
Profit from 80,391 54,346 108,999
operations
Net finance costs -12,174 -13,509 -33,829
Interest paid -16,833 -19,501 -46,755
Interest received 4,659 5,992 12,926
Exceptional items -12,431 -2,331 -13,612
Income from 519 -
associates
Profit before 56,305 38,506 61,558
taxation
Taxation -19,409 -13,042 -34,030
Profit after 36,896 25,464 27,528
taxation
Minority interest -5,338 -5,825 -9,012
Net profit for the 31,558 19,639 18,516
period
Weighted number of 100,114,533 100,114,533 100,114,533
ordinary shares in
issue
Adjusted headline 41.60 29.74 55.98
earnings per
ordinary share
(cents)
Headline earnings 38.00 29.74 55.98
per ordinary share
(cents)
Earnings per 31.52 19.62 18.49
ordinary share
(cents)
Basic earnings 31,558 19,639 18,516
(R 000)
Goodwill 1,929 7,800 25,203
amortisation
Loss on deconsolida- 4,396 - -
tion of Torque 42
Loss on disposal of 156 - -
fixed assets
Other exceptional - 2,331 12,328
items
Headline earnings 38,039 29,770 56,047
Portion of Once-off 3,607 - -
loss - Rectron
Adjusted headline 41,646 29,770 56,047
earnings
Consolidated balance sheet
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2001 31 Dec 2000 30 Jun 2001
R 000 R 000 R 000
ASSETS
Non-current assets 232,552 147,450 177,115
Property,plant and 38,468 37,024 39,252
equipment
Goodwill 5,990 24,477 11,247
Development costs 8,120 - 7,506
Investments in 73,980 45,871 60,063
associates
Other investments 99,574 34,827 41,804
and loans
Deferred taxation 6,420 5,251 17,243
asset
Current assets 1,139,198 872,213 819,357
Inventories on hand 410,079 399,330 313,375
Inventories in 98,878 37,991 47,149
transit
Trade and other 499,924 351,878 349,417
receivables
Taxation - - 33
Bank balances and 130,317 83,014 109,383
cash
TOTAL ASSETS 1,371,750 1,019,663 996,472
EQUITY AND LIABILITIES
Capital and 358,611 335,406 327,053
reserves
Share capital 801 801 801
Share premium 74,968 74,968 74,968
Accumulated profits 236,752 214,820 205,194
Other reserves 46,090 44,817 46,090
Outside 44,252 35,660 38,914
shareholders
interest
Non-current 235,603 19,868 10,585
liabilities
Interest bearing 235,290 16,334 9,544
long-term
borrowings
Interest free long- 313 3,534 313
term borrowings
Deferred taxation - - 728
liabilities
Current liabilities 733,284 628,729 619,920
Trade and other 667,280 366,581 411,845
payables
Interest bearing 14,573 182,573 136,608
short-term
borrowings
Interest free short- - 8,410 5,034
term borrowings
Deferred income 568 - 2,538
Taxation 6,557 1,931 24,515
liabilities
Bank overdrafts 44,306 69,234 39,380
TOTAL EQUITY AND 1,371,750 1,019,663 996,472
LIABILITIES
Consolidated statement of changes in equity
Ordinary Share Accumula- Other Transla- Total
share premium ted reserves tion
capital profits reserves
R 000 R 000 R 000 R 000 R 000 R 000
Balance at 30 801 74,968 195,181 43,166 1,651 15,767
June 2000
Net profit for - - 18,516 - - 18,516
the year
Realised - - -8,503 8,503 - -
profit on
disposal of
investments
Net foreign -7,230 -7,230
currency
translation
reserve
Balance at 30 801 74,968 205,194 51,669 -5,579 327,053
June 2001
Net profit for - - 31,558 - - 31,558
the period
Balance at 31 801 74,968 236,752 51,669 -5,579 58,611
December 2001
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2001 31 Dec 2000 30 Jun 2001
R 000 R 000 R 000
Operating
activities
Cash receipts from 1,087,439 948,558 2,081,769
customers
Cash paid to -1,049,894 -907,676 -1,875,226
suppliers and
employees
Net cash from 37,545 40,882 206,543
operations
Net interest paid -12,174 -19,501 -33,829
Income taxation -37,334 -16,761 -24,139
paid
Net cash (used in) -11,963 4,620 148,575
from operating
activities
Net cash used in -100,076 -2,370 -29,821
investing
activities
Net cash from (used 132,973 -23,511 -106,448
in) financing
activities
Net increase 20,934 -21,261 12,306
(decrease) in cash
and cash
equivalents
Cash and cash 109,383 104,275 104,275
equivalents at
beginning of the
year
Effect of foreign - - -7,198
exchange rate
changes
Cash and cash 130,317 83,014 109,383
equivalents at end
of the period
Segment analysis
Business Total Mecer Group Brother Comztek Rectron Eliminat
segment invest- ions
ments
R 000 R 000 R 000 R 000 R 000 R 000 R 000
Revenue 770,417 - 80,098 149,801 335,561 -95,849
1,240,028
EBITDA 89,039 49,676 - 6,059 3,522 29,782
Goodwill -1,929 - -1,929 - - -
amortisa-
tion
Deprecia- -6,719 -4,287 - -68 -398 -1,966
tion
Profit 80,391 45,389 -1,929 5,991 3,124 27,816 -
from
operations
Net -12,174 -6,223 -4,354 2,057 -1,376 -2,278 -
finance
costs
Interest -16,833 -8,930 -4,354 -21 -1,436 -2,815 723
paid
Interest 4,659 2,707 - 2,078 60 537 -723
received
Exception- -12,431 693 -3,184 - - -9,940
al items
Income 519 - - - - 519
from
associates
Profit 56,305 39,859 -9,467 8,048 1,748 16,117 -
before
taxation
Taxation -19,409 -11,408 - -2,414 -752 -4,835
Profit 36,896 28,451 -9,467 5,634 996 11,282 -
after
taxation
Minority -5,338 95 -5,433
interest
Net profit 31,558 28,546 -9,467 5,634 996 5,849 -
for the
period
Mecer Total South Zimbabwe Elimina-
geographic Africa tions
al segment
R 000 R 000 R 000 R 000
Revenue 770,417 748,715 25,479 -3,777
EBITDA 49,676 45,038 4,638
Depreciati -4,287 -4,251 -36
on
Profit 45,389 40,787 4,602 -
from
operations
Net -6,223 -6,771 548 -
finance
costs
Interest -8,930 -8,916 -14
paid
Interest 2,707 2,145 562
received
Exceptiona 693 -1,212 1905
l items
Profit 39,859 32,804 7,055 -
before
taxation
Taxation -11,408 -9,863 -1,545
Profit 28,451 22,941 5,510 -
after
taxation
Minority 95 95 -
interest
Net profit 28,546 23,036 5,510 -
for the
period
Rectron Limited
Comments:
Accounting Policies
The accounting policies at 31 December 2001 are consistent with those
applied at 30 June 2001 and is in accordance with South African Generally
Accepted Accounting Practice.
Review of Trading Results
The directors have pleasure in presenting the interim results of Rectron,
which cover the six-month period ended 31 December 2001.
The interim results for the South African operations reflect an increase
in turnover of 23,4% to R 335,6 million from R 256,9 million for the
corresponding period in 2000.
Profit from Operations increased by 41% to R 28,353 million from R 20,102
and the Gross Profit Margin increase to 12,9% from 12,3%.
The results of the UK and Australia operations have not been consolidated
in the current year due to the operations becoming associates on the 30th
June 2001. Both associate companies were profitable on 31st December 2001
with Rectron's profit share amounting to R 519 thousand.
Adjusted headline earnings increased to 15,20 c from 10,07 c in 2000.
Headline earnings decreased from 10,07 c to 9,40 c. The difference
between headline earnings and adjusted headline earnings resulted from
the exceptional item as detailed below.
Finance costs have increased along with the expansion of operations. The
Board is focused on reducing finance costs and improving financial
gearing through better working capital management.
Business Activities
Rectron maintains focus on its core competency, as a global computer
components solution company. This competency continues to be further
strengthened by relationships and alliances that it establishes and
nurtures both locally and internationally. Rectron continues to identify
and secure exclusive distribution rights for high profile international
products that can be sold through its expanding national dealer base.
Local Operations
Rectron's component distribution business enjoys a significant share of
the local market with strong demand for its product offering. Business is
conducted through three branches, one each in Midrand/Johannesburg, Cape
Town and Durban, all of which have required expansion due to demand for
products. A fourth branch in Bloemfontein will open in April 2002.
The Memory Manufacturing Laboratory is now fully operational and is
highly successful in reducing the risk of fluctuating prices and
availability while reducing the memory failure rate to all but zero. The
Peripheral Repair and Service Centre is improving customer satisfaction
and turn-around time as well as reducing costs. A new product training
facility has been established, which will improve the level of product
knowledge to the dealer base.
International Operations
The shareholding in both the Australian and UK operations was reduced to
50%, resulting in non-consolidation of their results. Both companies
reported profits for the six months under review and Rectron's share in
profits amounted to R 519 thousand.
Exceptional Item
In December 2001, management became aware of certain transactions
undertaken by the Taiwanese procurement house which was acting as an
agent for the Rectron group. These actions resulted in an expense of R
9,94 million being incurred by Rectron, which is reflected separately in
the interim results. Management have taken appropriate action with the
assistance of legal counsel.
Prospects
Rectron continues to strengthen it's product range, increasing market
share while improving operating efficiencies and effective overhead
control, thus improving operating margins. Additional sales resources
have been engaged to realize this potential.
Significant alliances established over the past few years continue to
play a major role in Rectron's growth initiatives. New agreements include
Rectron's appointment as an official Intel distributor. Rectron has also
acquired distributorships from Maxtor, Logitech and Toshiba.
Rectron is well positioned to take advantage of the recent restructuring
of the South African computer components distribution industry which has
left a gap of approximately R 3 billion. Management is of the opinion
that this advantage could start appearing as early as the second half of
this financial year.
The introduction of the Intel Pentium 4 processor, as well as the launch
of Windows XP last year, should revive PC sales during the course of this
year.
While remaining focused on our core competencies which are computer
components and peripherals, management believes that the server market,
mobile computing and wireless networking will be growth areas.
The recent appointment by Intel will allow us to enter the server market
with a solid line of server and networking products and Maxtor will
complement this offering with their range of NAS (network attached
storage) devices.
Toshiba, which is also a tier 1 brand name will provide us with a vehicle
to enter the mobile computing market as well as the wireless networking
segment.
We have also secured the Logitech distributorship which provides us with
a wide range of input devices such as keyboards, mice, joysticks and game
pads to add to our already impressive range of products.
The first half of the financial year covered by this interim report is
traditionally the slower six months in the annual sales and earnings
cycle.
Dividends
No dividends are declared at this interim date.
Explanatory Notes:
1. Accounting Policies
The accounting polices applied at 31 December 2001 are consistent with
those applied at 30 June 2001.
2. Seasonal Cycle
Rectron's revenue and earnings are generated in a ratio of approximately
45%/55% between the first- and second- half of the financial year.
3. Web Site
Rectron's web site at www.rectron.co.za will provide more
information regarding
the Group and its products.
By order of the Board: Registered office:
Alan Michas 152 Fifteenth Road
Company Secretary Randjespark
Midrand
6 March 2002
FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2001
Consolidated income statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2001 31 Dec 2000 30 Jun 2001
R 000 R 000 R 000
Revenue 335,561 316,369 625,975
Cost of sales -292,285 -277,590 -550,910
Gross profit 43,276 38,779 75,065
Operating expenses -14,923 -18,677 -39,601
Profit from operations 28,353 20,102 35,464
Finance costs -2,815 -1,898 -4,889
Exceptional items -9,940 0 -814
Income from associates 519 0 0
Profit before taxation 16,117 18,204 29,761
Taxation -4,835 -6,119 -11,069
Profit after taxation 11,282 12,085 18,692
Minority interest 0 3 38
Net profit for the year 11,282 12,088 18,730
Weighted number of 120,000,000 120,000,000 120,000,000
ordinary shares in issue
Adjusted headline 15.20 10.07 16.29
earnings per ordinary
share (cents)
Headline earnings per 9.40 10.07 16.29
ordinary share (cents)
Earnings per ordinary 9.40 10.07 15.61
share (cents)
Basic earnings (R 000) 11,282 12,088 18,730
Other exceptional items 0 0 814
Headline earnings 11,282 12,088 19,544
Once-off loss after tax 6,958 0 0
Adjusted headline 18,240 12,088 19,544
earnings
Consolidated balance
sheet
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2001 31 Dec 2000 30 Jun 2001
R 000 R 000 R 000
ASSETS
Non-current assets 28,773 10,791 24,400
Property, plant and 11,874 9,417 11,942
equipment
Investments in 15,592 0 11,151
associates
Deferred taxation asset 1,307 1,374 1,307
Current assets 223,686 215,296 177,059
Inventory 125,632 129,317 90,190
Trade and other 90,931 81,395 60,487
receivables
Bank balances and cash 7,123 4,584 26,382
TOTAL ASSETS 252,459 226,087 201,459
EQUITY AND LIABILITIES
Capital and reserves 91,571 74,032 80,289
Share capital 1,200 1,200 1,200
Share premium 22,776 22,776 22,776
Accumulated profits 67,595 50,016 56,313
Other reserves 0 40 0
Outside shareholders 0 39 0
interest
Long-term borrowings 361 824 418
Current liabilities 160,527 151,192 120,752
Trade and other payables 122,117 88,906 89,068
Short-term borrowings 74 21,716 20,142
Taxation liabilities 1,255 5,271 6,269
Bank overdrafts 37,081 35,299 5,273
TOTAL EQUITY AND 252,459 226,087 201,459
LIABILITIES
Consolidated cash flow
statement
Operating activities
Cash receipts from 305,063 283,688 594,427
customers
Cash paid to suppliers -317,558 -319,006 -567,608
and employees
Net cash (used in) from -12,495 -35,318 26,819
operations
Interest paid -2,277 -1,898 -4,206
Income taxation paid -9,849 -2,397 -6,282
Net cash (used in) from -24,621 -39,613 16,331
operating activities
Net cash used in -6,376 -2,157 -16,069
investing activities
Net cash from financing 11,738 39,710 19,476
activities
Net (decrease) increase -19,259 -2,060 19,738
in cash and cash
equivalents
Cash and cash 26,382 6,644 6,644
equivalents at beginning
of the year
Cash and cash 7,123 4,584 26,382
equivalents at end of
the period
Consolidated statement
of changes in equity
Ordinary share Share premium Accumulated
capital profits
R 000 R 000 R 000
Balance at 30 June 2000 1,200 22,776 37,894
Net profit for the year - - 18,730
Net foreign currency - - -
translation reserve
Reclassification foreign - - -311
currency translation
reserve
Balance at 30 June 2001 1,200 22,776 56,313
Net profit for the - - 11,282
period
Balance at 3 December 1,200 22,776 67,595
2001
