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Mustek Limited - Unaudited Interim Results For The 6 Months Ended 31 December
2003
Mustek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST
ISIN: ZAE000012373
("Mustek" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTHS
ENDED 31 DECEMBER 2003
Consolidated income statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2003 31 Dec 2002 30 Jun 2003
R 000 R 000 R 000
Revenue 1 169 819 1 418 440 2 975 517
Cost of sales (974 587) (1 189 200) (2 518 640)
Gross profit 195 232 229 240 456 877
Operating expenses (182 544) (107 868) (222 398)
EBITDA* 12 688 121 372 234 479
Depreciation (8 330) (8 029) (16 287)
Goodwill amortisation (1 390) (1 857) (4 311)
Profit from operations 2 968 111 486 213 881
Net finance costs (2 020) (13 463) (13 134)
Net interest income
(expense) 762 (10 629) (7 667)
Trade finance
commission (2 782) (2 834) (5 467)
Exceptional items 7 (14 329) (16 168)
Income from associates 4 936 5 732 10 924
Profit before tax 5 891 89 426 195 503
Income tax benefit
(expense) 265 (28 868) (86 981)
Profit after tax 6 156 60 558 108 522
Minority interest 1 253 (10 479) (16 769)
Net profit for the
period 7 409 50 079 91 753
EBITDA* - earnings before
interest, taxation,
depreciation and
amortisation
Weighted average number
of ordinary shares
in issue 98 167 663 87 548 263 94 396 031
Headline earnings per
ordinary share (cents) 8.34 75.43 118.65
Basic earnings per
ordinary share (cents) 7.55 57.20 97.20
Diluted headline
earnings per ordinary
share (cents) 7.95 70.33 112.60
Diluted basic earnings per
ordinary share (cents) 7.20 53.34 92.24
Dividend per ordinary
share (cents) 25.00 - 25.00
Reconciliation between
Basic and headline
Earnings
Basic earnings 7 409 50 079 91 753
Goodwill amortisation 1 390 1 857 4 311
Profit on discontinuance
of subsidiary (1 046) - (380)
Realisation of foreign
currency translation
reserve 433 11 193 11 193
Loss on disposal of
associates - 2 909 5 128
Headline earnings 8 186 66 038 112 005
Consolidated balance sheet
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2003 31 Dec 2002 30 Jun 2003
R 000 R 000 R 000
ASSETS
Non-current assets 174 095 196 981 148 250
Property, plant and
equipment 50 626 38 183 40 000
Goodwill 2 938 4 495 3 830
Development costs 8 017 7 737 7 707
Investments in
associates 73 905 84 930 61 799
Other investments
and loans 25 813 50 213 28 063
Deferred taxation
asset 12 796 11 423 6 851
Current assets 1 063 702 1 074 816 1 253 268
Inventories on hand 348 351 414 649 370 077
Inventories in transit 54 531 50 455 51 269
Trade and other
Receivables 317 492 341 403 398 019
TDR debtor - 101 419 -
Taxation receivable 28 834 - -
Bank balances and cash 314 494 166 890 433 903
TOTAL ASSETS 1 237 797 1 271 797 1 401 518
EQUITY AND LIABILITIES
Capital and reserves 442 621 487 233 457 056
Share capital 791 841 779
Share premium 60 553 100 968 58 494
Accumulated profits 383 414 332 636 400 781
Other reserves (2 137) 52 788 (2 998)
Minority interest 61 526 96 963 65 769
Non-current liabilities 209 452 165 203 207 685
Long-term borrowings 209 452 165 203 207 685
Current liabilities 524 198 522 398 671 008
Foreign exchange contract
liabilities 68 145 14 412 46 729
Trade and other
payables 402 983 443 756 526 831
Short-term borrowings 8 585 13 340 10 343
Deferred income 13 520 12 165 14 629
Taxation liabilities - 11 210 49 889
Bank overdrafts 30 965 27 515 22 587
TOTAL EQUITY AND
LIABILITIES 1 237 797 1 271 797 1 401 518
Consolidated statement of changes in equity
Ordinary share Share Accumulated
capital premium profits
R 000 R 000 R 000
Balance at
30 June 2002 727 38 190 282 557
Net profit for
the year - - 91 753
Shares issued in terms
of option scheme 23 3 839 -
Share buy-back (131) (71 241) -
Dividend paid - - (25 198)
Taiwan Depositary
Receipts
(TDR) listing 160 93 468 -
TDR expenses
written off - (5 762) -
Realisation of foreign
currency translation
reserve - - -
Transfer to accumulated
profits - - 51 669
Net foreign currency
translation reserve - - -
Balance at
30 June 2003 779 58 494 400 781
Net profit for
the period - - 7 409
Shares issued in terms
of option scheme 12 2 059 -
Dividend paid - - (24 776)
Realisation of foreign
currency translation
reserve - - -
Net foreign currency
translation reserve
Balance at
31 December 2003 791 60 553 383 414
Other reserves Translation Total
reserves
R 000 R 000 R 000
Balance at
30 June 2002 1 669 (9 883) 363 260
Net profit for
the year - - 91 753
Shares issued
in terms of
option scheme - - 3 862
Share buy-back - - 71 372)
Dividend paid - - (25 198)
Taiwan Depositary Receipts
(TDR) listing - - 93 628
TDR expenses written off - - (5 762)
Realisation of foreign
currency translation
reserve - 11 193 11 193
Transfer to accumulated
profits 51 669) - -
Net foreign currency
translation reserve - (4 308) (4 308)
Balance at 30 June 2003 - (2 998) 457 056
Net profit for
the period - - 7 406
Shares issued in terms
of option scheme - - 2 071
Dividend paid - - (24 776)
Realisation of foreign
currency translation
reserve - 658 658
Net foreign currency
translation reserve 203 203
Balance at
31 December 2003 - (2 137) 442 621
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2003 31 Dec 2002 30 Jun 2003
R 000 R 000 R 000
Operating activities
Cash receipts from
customers 1 218 592 1 407 561 2 926 693
Cash paid to suppliers and
employees (1 223 091) (1 352 018) (2 662 360)
Net cash (used in)
generated from operations (4 499) 55 543 264 333
Net interest paid (2 020) (13 463) (12 484)
Dividends received - 1 788 1 788
Dividends paid (24 776) - (25 198)
Income taxes paid (72 513) (48 936) (61 889)
Net cash (used in) from
operating activities (103 808) (5 068) 166 550
Net cash used in investing
activities (30 139) (4 858) (638)
Net cash from (used in)
financing activities 14 538 (52 391) 38 784
Net (decrease) increase
in cash and cash
equivalents (119 409) (62 317) 204 696
Cash and cash equivalents
at beginning of the year 433 903 229 207 229 207
Cash and cash equivalents
at end of the period 314 494 166 890 433 903
1. Reporting
This report is prepared on the historical cost basis, except for certain
financial instruments that are fairly valued, using accounting policies that
comply with South African Statements of Generally Accepted Accounting Practice
("GAAP"), the requirements of the South African Companies Act and the JSE
Securities Exchange South Africa. The accounting policies are consistent with
those applied in the financial statements for the year ended 30 June 2003. The
board is of the view that the company and its subsidiaries are substantially
compliant with the recommendations as set out in the Code of Corporate Practices
and Conduct contained in the King Report, 2002.
2. Segment Analysis
Segment analysis
Business segments Total Mecer Group
investments
R 000 R 000 R 000
Revenue 1 169 819 631 142 -
EBITDA 12 688 12 468 -
Depreciation (8 330) (5 705) -
Goodwill amortisation (1 390) - (1 390)
Profit from operations 2 968 6 763 (1 390)
Net finance costs (2 020) (1 479) (671)
- Net interest income
(expense) 762 982 (671)
Trade finance
commission (2 782) (2 461) -
Exceptional items 7 - (250)
Income from associates 4 936 - 4 936
Profit before taxation 5 891 5 284 2 625
Taxation 265 2 446 (857)
Profit after taxation 6 156 7 730 1 768
Minority interest 1 253 388 -
Net profit for the period 7 409 8 118 1 768
Business segments Brother Rectron Eliminations
R 000 R 000 R 000
Revenue 73 063 479 089 (13 475)
EBITDA 9 528 (9 308)
Depreciation (85) (2 540) -
Goodwill amortisation - -
Profit from operations 9 443 (11 848) -
Net finance costs 2 452 (2 322) -
- Net interest income
(expense) 2 452 (2 001) -
- Trade finance commission - (321) -
Exceptional items - 257 -
Income from associates - - -
Profit before taxation 11 895 (13 913) -
Taxation (6 026) 4 702
Profit after taxation 5 869 (9 211) -
Minority interest (1 761) 2 626
Net profit for the period 4 108 (6 585) -
There has been no change in the Group"s business segments to that reported
previously.
The Group"s operations are mainly located in South Africa. Revenues, profits
and assets of the Group"s foreign operations are not significant.
3. Operating results
Group revenue decreased by 18% as a result of the effect that the strengthening
Rand had on the selling prices of personal computers ("PCs") and computer
components. The Rand has strengthened by 29% compared to comparative period and
this drove the average selling price of Mecer PCs down by 30%.
The gross profit percentage increased to 16,7% (2002: 16,2%). Without the
implementation of GAAP Statement AC133, the gross profit percentage would have
been 19,1%.
Mustek"s policy to take out forward cover on US dollar exposure for imports had
a significant impact on earnings. Losses on forward exchange structures amounted
to R62,3 million (2002: nil) (Mecer: R27,9 million and Rectron: R34,4 million).
Subsequent to the period-end, Mustek disposed of the bulk of the contracts at
exchange rates varying between R6.98 and R7.33 to the US dollar, realising a
surplus of approximately R12 million.
In addition to the above, GAAP Statement AC133 had the effect of reducing gross
profit by R27,8 million due to the valuation of embedded derivatives in foreign
payables, which arose mainly as a result of the strengthening Rand and the
corresponding credit went to operating expenses.
The associates continued to perform well and contributed R4,9 million profit
before taxation (2002: R5,7 million).
Mustek"s major clients include corporates, government, parastatals, retail and
an extensive dealer network.
4. Cash flow
Despite dividend payments of R50 million and a R38 million settlement with the
South African Revenue Services, focused working capital management resulted in
bank balances and cash increasing to R314 million (2002: R167 million) at period
end.
5. Corporate Activities
Mustek invested R2,6 million and subscribed for 51% in Mecer East Africa (Pty)
Ltd and Mecer EPZ (Pty) Ltd, new operations located in Kenya.
An investment of R13,9 million was also made in Brazil, in establishment and
start-up costs, promoting the Group"s entry and geographical footprint in Latin
America.
Rectron discontinued its 50% investment in Rectron United Kingdom and are in the
process of setting up a new wholly owned subsidiary, Rectron PLC.
Success in the international market, key to the Group"s medium and long-term
growth, remains a challenge and requires continued investment and a strong focus
on cost competitiveness. Early indications are that the world economy is
starting to recover.
6. Post-balance sheet events
Mustek has been awarded 350 out of the total 1 070 schools that form part of the
first two phases of the Gauteng Online project and expects to gain a significant
portion of the remainder of this contract.
7. Black economic empowerment
Subject to shareholders" approval on 26 February 2004, Mustek entered into an
agreement with Safika Holdings (Pty) Ltd ("Safika"), full particulars of which
are contained in the circular forwarded to shareholders, dated 2 February 2004.
Briefly, Safika will subscribe for a preference share on the implementation date
entitling Safika to exercise votes in Mustek equivalent to an effective 25% plus
one share of the voting rights in Mustek on a poll. Safika will also acquire up
to a maximum shareholding of 25% plus one share of the total volume weighted
average number of issued ordinary shares in Mustek from 1 July 2003 ("the
commencement date") to the fifth anniversary of the commencement date. This
effectively gives Safika 25% plus one share of the control of Mustek from the
implementation date.
Mustek"s long standing policies relating to skills transfer, employment equity,
procurement from Black Economic Enterprise (`BEE") suppliers and other `BEE"
initiatives has resulted in Mustek maintaining its BEE classification.
8. 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.
Accordingly, notice is hereby given that a dividend of 25 cents per share for
the period ended 31 December 2003 has been 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 interim dividend are as
follows:
Last day to trade cum dividend Thursday, 18 March 2004
First day to trade ex dividend Friday, 19 March 2004
Record date Friday, 26 March 2004
Payment date Monday, 29 March 2004
No share certificates may be dematerialised or rematerialised between Friday, 19
March 2004 and Friday, 26 March 2004, 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 shareholders
at their risk on 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.
9. Outlook
In calendar year 2003, unit growth in South Africa increased by 13,8% and the
group anticipates accelerated growth with Government"s education initiatives
being rolled out. Further impetus to growth will come from increased PC demand
from the home user market, as computer literacy rises.
The number of Mecer notebooks sold increased by 29% and Mustek expects this
market to grow as the price differential between desktops and notebooks narrows.
Increased growth in PC demand in Southern Africa and Africa continues to be
positive.
Mustek continues to explore opportunities, investments and partnerships in other
regions, particularly in the rest of Africa and other emerging markets as part
of its globalisation strategy.
Performance at the beginning of 2004 has been encouraging.
Earnings remain sensitive to the strength of the Rand against the US Dollar
10. Corporate information
Website: www.mustek.co.za, www.mecer.co.za
Company secretary
Debbie Tam
Registered office:
322 15th Road
Randjespark
Midrand
1685
Republic of South Africa
Postal address:
P.O. Box 1638
Parklands
2121
Transfer secretary:
Computershare Limited
70 Marshall Street
Johannesburg
2001
Sponsor:
Include Deloitte & Touche Sponsors Logo
On behalf of the board of directors
David C. Kan Hein Engelbrecht
Chief Executive Officer Financial Director
25 February 2004
Date: 25/02/2004 05:50:18 PM Produced by the JSE SENS Department
