| Wed 1 Sep 2004, 18:15 | | FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2004 |
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MUSTEK LIMITED - AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2004
MUSTEK LIMITED
Registration number 1987/070161/06
Share code MST
ISIN ZAE 000012373
AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Total dividend of 50 cents per share
Bank balances and cash of R414 million
Consolidated income statement
2004 2003
R000 R000
Revenue 2 683 978 2 975 517
Cost of sales (2 214 570) (2 518 640)
Gross profit 469 408 456 877
Administrative expenses (226 164) (214 764)
Foreign exchange and derivative losses (106 597) (7 634)
EBITDA * 136 647 234 479
Depreciation (17 169) (16 287)
Goodwill amortisation (5 124) (4 311)
Profit from operations 114 354 213 881
Income from investments 42 692 31 160
Finance costs (42 760) (38 827)
Trade finance commission (7 091) (5 467)
Exceptional items (20 171) (16 168)
Income from associates 1 703 10 924
Profit before tax 88 727 195 503
Income tax expense (32 141) (86 981)
- Prior year 803 (28 567)
- Current year (32 944) (58 414)
Profit after tax 56 586 108 522
Minority interest (5 789) (16 769)
Net profit for the year 50 797 91 753
* EBITDA - earnings before interest,
taxation, depreciation and amortisation
Weighted average number of ordinary
shares in issue 100 010 307 94 396 031
Number of ordinary shares in issue 101 566 618 97 433 818
Net asset value per share (cents) 460,36 469,09
Headline earnings per ordinary
share (cents) 72,50 118,65
Basic earnings per ordinary share (cents) 50,79 97,20
Diluted headline earnings
per ordinary share (cents) 68,83 112,60
Diluted basic earnings per
ordinary share (cents) 48,22 92,24
Dividend per ordinary share (cents) 50,00 25,00
Dividend per ordinary share -
proposed (cents) 25,00 25,00
Reconciliation between basic and
headline earnings R000 R000
Basic earnings 50 797 91 753
Goodwill amortisation 5 124 4 311
Group`s share of profit on disposal
of subsidiary (155) (380)
Loss on disposal of associates - 5 128
Realisation of foreign currency
translation reserve - 11 193
Impairment of associates 16 746 -
Headline earnings 72 512 112 005
Consolidated balance sheet
2004 2003
R000 R000
ASSETS
Non-current assets 154 177 148 250
Property, plant and equipment 58 096 40 000
Goodwill 3 576 3 830
Development costs 8 283 7 707
Investments in associates 60 068 61 799
Other investments and loans 13 797 28 063
Deferred taxation asset 10 357 6 851
Current assets 1 269 762 1 253 268
Inventories on hand 460 942 370 077
Inventories in transit 50 178 51 269
Trade and other receivables 329 128 398 019
Tax assets 15 219 -
Bank balances and cash 414 295 433 903
TOTAL ASSETS 1 423 939 1 401 518
EQUITY AND LIABILITIES
Capital and reserves 467 573 457 056
Share capital 812 779
Share premium 73 127 58 494
Accumulated profits 401 417 400 781
Other reserves (7 783) (2 998)
Outside shareholders` interest 66 171 65 769
Non-current liabilities
Long-term borrowings 206 787 207 685
Current liabilities 683 408 671 008
Foreign exchange contract liabilities 27 988 46 729
Trade and other payables 601 154 526 831
Short-term borrowings 4 317 10 343
Deferred income 13 317 14 629
Tax liabilities 2 098 49 889
Bank overdrafts 34 534 22 587
TOTAL EQUITY AND LIABILITIES 1 423 939 1 401 518
Consolidated cash flow statement
2004 2003
R000 R000
Operating activities
Cash receipts from customers 2 715 847 2 926 693
Cash paid to suppliers and employees (2 563 073) (2 662 360)
Net cash from operations 152 774 264 333
Interest received 12 507 8 432
Finance costs paid (19 016) (20 916)
Dividends received - 1 788
Dividends paid (55 979) (25 198)
Income taxes paid (97 022) (61 889)
Net cash (used in) from operating
activities (6 736) 166 550
Net cash used in investing activities (39 121) (638)
Net cash from financing activities 26 249 38 784
Net (decrease) increase in cash and
cash equivalents (19 608) 204 696
Cash and cash equivalents at beginning
of the year 433 903 229 207
Cash and cash equivalents at end
of the year 414 295 433 903
Consolidated statement of changes in equity
Ordinary
share Share Accumulated
capital premium profits
R000 R000 R000
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 - - 50 797
Shares issued in terms of
option scheme 17 3 010 -
Dividend paid - - (50 161)
Taiwan depositary receipts
(TDR) listing 16 12 112 -
TDR Expenses written off - (489) -
Foreign currency translation
reserve - - -
Balance at 30 June 2004 812 73 127 401 417
Consolidated statement of changes in equity (continued)
Other Translation
reserves reserves Total
R000 R000 R000
Balance at 30 June 2002 51 669 (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 - - 50 797
Shares issued in terms of
option scheme - - 3 027
Dividend paid - - (50 161)
Taiwan depositary receipts
(TDR) listing - - 12 128
TDR Expenses written off - - (489)
Foreign currency translation
reserve - (4 785) (4 785)
Balance at 30 June 2004 - (7 783) 467 573
Commentary
1. Accounting policies
These consolidated abridged financial statements for the year ended 30 June 2004
are prepared in accordance with the South African Statement of Generally
Accepted Accounting Practice (SA GAAP) applicable to interim financial
reporting. The accounting policies used are consistent with those used in the
annual financial statements for the year ended 30 June 2003 except for the
consolidation of the Mustek Share Incentive Trust as required by a directive
issued by the JSE Securities Exchange South Africa during February 2004. There
was no effect on net profit previously reported.
From a dividend per share point of view disclosure has been provided based on
the period to which the dividends relate. Basic earnings per share is calculated
by dividing net profit by the weighted average number of ordinary shares in
issue during the 2004 year. Headline earnings per share is calculated by
dividing headline earnings by the weighted average number of ordinary shares in
issue during the year. Fully diluted earnings per share takes into account the
dilutive effect of share options held by employees.
2. Audit report
The consolidated financial statements for the year have been audited by Henry K
H Pon & Co and Deloitte & Touche and their accompanying unqualified audit report
as well as their unqualified audit report on this set of summarised financial
information is available for inspection at the company`s registered office.
3. Corporate governance
The Group subscribes to and complies with the Code on Corporate Governance
Practices and Conduct as contained in the second King Report on Corporate
Governance.
4. Operating results
Unit sales of Mecer PCs increased by 19% over the comparative period. However,
Group revenues decreased by 10% due to the Rand strengthening by an average of
24% compared to the comparative period. This drove the average selling price of
Mecer PC`s and accessories down.
Subsidiaries Rectron and Brother Business Machines performed well and managed to
increase their gross profit percentages to compensate for decreased revenues due
to the strengthening Rand.
The Group`s gross profit percentage improved to 17,5% (2003:15,4%).
Foreign exchange and derivative losses consists of foreign exchange losses of
R113,4 million, mainly due to the rapid appreciation of the Rand, a negative
fair value adjustment of R4,2 million on an interest rate swap, an embedded
derivative loss of R1,9 million and a gain of R12,9 million due to the valuation
of embedded derivatives in foreign payables.
The application of SA GAAP Statement AC 133 had the effect of reducing gross
profit by R12,9 million (2003: R32,7 million). This arose from the valuation of
embedded derivatives in foreign payables, which arose mainly as a result of the
strengthening Rand, with the corresponding credit to foreign exchange and
derivative losses (refer paragraph above). The fair value adjustments of
investments and loans amounting to R3,6 million are included in headline
earnings and accounted for accordingly.
Income from associates reduced by R9,2 million; investments previously accounted
for on a cost basis now qualify for equity accounting. On a comparative basis,
associates contributed R10,7 million profit (2003: R10,9 million).
The effective tax rate for the year was 36,2% (2003: 44,5%) due primarily to
dividends received that are not taxed and impairments of investments and
associates that are not deductible for tax purposes.
Capital expenditure for the year was R31,2 million (2003: R17,4 million)
The board is pleased to announce a final dividend of 25 cents per share which
brings the total dividend declared for the year to 50 cents per share.
5. Exceptional items
Other investments and loans have been fair valued and this led to a loss of R3,6
million on the investment in Casetek International Co Limited. Impairments of
R0,6 million and R16,2 million in Civon Corporation and Preworx (Pty) Limited
respectively, together with a profit of R0,2 million on the disposal of Rectron
United Kingdom, make up the balance.
6. Cash flow
Despite dividend payments of R50 million, a R38 million settlement with the
South African Revenue Service and additional investments of R39,1 million,
focused working capital management resulted in bank balances and cash remaining
strong at R414 million (2003: R433 million).
7. Corporate activities
Mustek invested R3,0 million and subscribed for 51% in Mecer East Africa (Pty)
Limited, a new operation located in Kenya. An investment of R33,2 million was
also made in Brazil, in establishment and start-up costs, promoting the Group`s
entry and geographical footprint in Latin America.
A subsidiary, Rectron International Holdings BV divested of its 50% investment
in Rectron United Kingdom Limited and Rectron Holdings Limited established a
new, wholly owned subsidiary, Rectron PLC. It also established two new local
subsidiaries, IT Depot (Pty) Limited and Corex IT Distribution Dynamics (Pty)
Limited in which it holds 100% and 60% respectively.
8. Post-balance sheet events
Mustek has disposed of its 40% investment in Gijima Support Services (Pty)
Limited to Gijima Info Technologies Afrika (Pty) Limited, subject to certain
conditions precedent.
On 31 August 2004, the shareholders approved a transaction with SAFIKA Holdings
(Pty) Limited (`SAFIKA`) to introduce SAFIKA as a Black Economic Empowerment
(`BEE`) shareholder. The intention of the BEE transaction is that SAFIKA would
be entitled to acquire up to a maximum shareholding of 25% plus one share of the
voting rights in Mustek over a five-year period. This transaction effectively
gives SAFIKA 25% plus one share of the control of Mustek from the implementation
date.
The company has approved capital expenditure for Rectron`s new premises to the
value of R40 million.
9. Segment analysis
For management purposes, the Group is currently organised into the following
business segments and these segments are the basis on which the Group reports
its primary segment information:
Total Mecer Rectron
R000 R000 R0000
Revenue 2 683 978 1 406 236 1 130 016
EBITDA 136 647 92 236 20 375
Depreciation (17 169) (11 707) (5 290)
Goodwill amortisation (5 124) - -
Profit (loss) from operations 114 354 80 529 15 085
Income from investments 42 692 25 536 12 843
Finance costs (42 760) (27 586) (14 233)
Trade finance commission (7 091) (6 086) (1 005)
Exceptional items (20 171) - 235
Income from associates 1 703 - -
Profit (loss) before tax 88 727 72 393 12 925
Income tax expense (32 141) (14 418) (5 731)
Profit (loss) after tax 56 586 57 975 7 194
Minority interest (5 789) 966 (1 602)
Net profit (loss) for the year 50 797 58 941 5 592
Group reports its primary segment information: (continued)
Group
Brother investments Eliminations
R000 R000 R000
Revenue 177 029 - (29 303)
EBITDA 24 036 - -
Depreciation (172) - -
Goodwill amortisation - (5 124) -
Profit (loss) from
operations 23 864 (5 124) -
Income from investments 4 313 - -
Finance costs (165) (776) -
Trade finance commission - - -
Exceptional items - (20 406) -
Income from associates - (1 703) -
Profit (loss) before tax 28 012 (24 603) -
Income tax expense (10 837) (1 155) -
Profit (loss) after tax 17 175 (25 758) -
Minority interest (5 153) - -
Net profit (loss) for
the year 12 022 (25 758) -
Geographic segments
The Group`s operations are mainly located in South Africa. Revenues, profits,
losses, assets and liabilities of the Group`s foreign operations are not
significant.
10. Outlook
PC unit growth in South Africa continues to be positive and the Group
anticipates accelerated growth in the years ahead as a result of:
Replacement of Y2K equipment purchases, which are now four years old;
Government`s education initiatives;
Increased PC demand from the home-user market, as computer literacy increases
and prices remain competitive with a stronger Rand;
A new operating system to be released by Microsoft during 2006 that will require
hardware to be upgraded; and
BEE procurement from large institutions, government and parastatals.
Mustek continues to explore opportunities, investments and partnerships in other
regions, particularly in Sub-Saharan Africa and other emerging markets as part
of its globalisation strategy.
Earnings remain sensitive to the strength of the Rand against the US Dollar, but
will move positively with any weakening of the Rand against the US Dollar.
11. JSE Securities Exchange South Africa requirements
This announcement has been prepared in accordance with the Listings Requirements
of the JSE Securities Exchange South Africa.
12. Declaration of final dividend
The directors have resolved to declare a dividend of 25 cents (2003: 25 cents)
per share, making a total dividend of 50 cents (2003: 50 cents) per share for
the year ended 30 June 2004.
Notice is hereby given that a final dividend of 25 cents per share for the year
ended 30 June 2004 has been declared, payable to shareholders recorded in the
books of the company at the close business on the record date appearing below.
The salient dates applicable to the final dividend are as follows:
2004
Last day to trade cum
final dividend Thursday, 23 September 2004
First day to trade
ex final dividend Monday, 27 September 2004
Record date Friday, 1 October 2004
Payment date Monday, 4 October 2004
No share certificates may be dematerialised or rematerialised between Monday, 27
September 2004 and Friday, 1 October 2004, both days inclusive.
Dividend cheques will be posted and electronic payments made, where applicable,
to certificated shareholders on the payment date. Dematerialised shareholders
will have accounts with their Central Securities Depository Participant or
brokers credited on the payment date.
13. Result of the general meeting
Shareholders are advised that at the general meeting held on Tuesday, 31 August
2004 (the general meeting), the requisite majority of Mustek`s shareholders
approved the special and ordinary resolutions necessary to carry out and
implement the Black Economic Empowerment transaction entered into between Mustek
and Safika Holdings (Proprietary) Limited and Mduduzi Edward Gama.
The special resolutions passed at the general meeting will be lodged with the
Registrar of Companies for registration.
14. Corporate information
Website: www.mustek.co.za or www.mecer.co.za
Company secretary
Debbie Tam retired as company secretary on 1 September 2004 and Neels Coetzee
has been appointed as company secretary with immediate effect.
Transfer secretary
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001.
(PO Box 61051, Marshalltown 2107, South Africa).
Telephone: (011) 370-5000.
Registered office
322 15th Road, Randjespark, Midrand, 1685
Postal address
P.O. Box 1638, Parklands, 2121
Sponsor:
Deloitte & Touche Sponsor Services (Pty) Limited
On behalf of the board of directors
David C Kan
Chief Executive Officer
Hein Engelbrecht
Financial Director
1 September 2004
