| Tue 1 Mar 2005, 9:23 | | Mustek - Unaudited interim results for the six mon |
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Mustek - Unaudited interim results for the six months ended 31 December 2004
MUSTEK LIMITED
Registration number 1987/070161/06
Share code MST ISIN ZAE000012373
Unaudited interim results for the six months ended 31 December 2004
Interim dividend increased to 30 cents
Improved earnings
Unit sales well up
Continued strong balance sheet
Consolidated income statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2004 31 Dec 2003 30 June 2004
R000 R000 R000
Revenue 1 346 225 1 169 819 2 683 978
Cost of sales (1 138 480) (974 587) (2 214 570)
Gross profit 207 745 195 232 469 408
Operating expenses (114 020) (182 544) (332,761)
EBITDA* 93 725 12 688 136 647
Depreciation (8 840) (8 330) (17 169)
Goodwill amortisation (1 288) (1 390) (5 124)
Profit from operations 83 597 2 968 114 354
Income from investments 16 023 19 084 42 692
Finance costs (23 231) (18 322) (42 760)
Trade finance commission (3 235) (2 782) (7 091)
Exceptional items 2 239 7 (20 171)
Income from associates 2 852 4 936 1 703
Profit before tax 78 245 5 891 88 727
Income tax (expense) benefit (23 600) 265 (32 141)
Profit after tax 54 645 6 156 56 586
Minority interest (8 199) 1 253 (5 789)
Net profit for the period 46 446 7 409 50 797
*EBITDA - earnings before
interest, taxation,
depreciation and
amortisation
Weighted average number of
ordinary shares in issue 102 421 873 98 167 663 100 010 307
Number of ordinary shares
in issue 103 085 918 98 850 018 101 566 618
Net asset value per
share (cents) 478,43 447,77 460,36
Headline earnings per
ordinary share (cents) 44,42 8,34 72,50
Basic earnings per ordinary
share (cents) 45,35 7,55 50,79
Diluted headline earnings per
ordinary share (cents) 42,93 7,95 68,83
Diluted basic earnings per
ordinary share (cents) 43,83 7,20 48,22
Dividend per ordinary
share (cents) 25,00 25,00 50,00
Reconciliation between basic
and headline earnings R000 R000 R000
Basic earnings 46 446 7 409 50 797
Goodwill amortisation 1 288 1 390 5 124
Group`s share of profit on
disposal of subsidiary - (613) (155)
Impairment of associates - - 16 746
Profit on disposal of
associate (2 239) - -
Headline earnings 45 495 8 186 72 512
Consolidated balance sheet
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2004 31 Dec 2003 30 June 2004
R000 R000 R000
ASSETS
Non-current assets 157 921 174 095 154 177
Property, plant and
equipment 88 992 50 626 58 096
Goodwill 2 580 2 938 3 576
Development costs 10 269 8 017 8 283
Investments in associates 35 269 73 905 60 068
Investment in joint venture 2 212 - -
Other investments and loans 12 087 25 813 13 797
Deferred taxation asset 6 512 12 796 10 357
Current assets 1 194 457 1 063 702 1 269 762
Inventories on hand 420 367 348 351 460 942
Inventories in transit 13 015 54 531 50 178
Trade and other receivables 424 996 317 492 329 128
Taxation receivable 19 300 28 834 15 219
Bank balances and cash 316 779 314 494 414 295
TOTAL ASSETS 1 352 378 1 237 797 1 423 939
EQUITY AND LIABILITIES
Capital and reserves 493 193 442 621 467 573
Ordinary share capital 825 791 812
Ordinary share premium 75 972 60 553 73 127
Preference share capital 265 - -
Preference share premium 4 000 - -
Accumulated profits 422 288 383 414 401 417
Translation reserves (10 157) (2 137) (7 783)
Minority interest 75 052 61 526 66 171
Non-current liabilities 215 438 209 452 206 787
Long-term borrowings 215 438 209 452 206 787
Current liabilities 568 695 524 198 683 408
Foreign exchange contract
liabilities 9 413 68 145 27 988
Trade and other payables 453 157 402 983 601 154
Short-term borrowings 23 987 8 585 4 317
Deferred income 11 379 13 520 13 317
Taxation liabilities 967 - 2 098
Bank overdrafts 69 792 30 965 34 534
TOTAL EQUITY AND LIABILITIES 1 352 378 1 237 797 1 423 939
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year end
31 Dec 2004 31 Dec 2003 30 June 2004
R000 R000 R000
Operating activities
Cash receipts from customers 1 292 628 1 218 592 2 715 847
Cash paid to suppliers
and employees (1 346 540) (1 223 091) (2 563 073
Net cash (used in) generated
from operations (53 912) (4 499) 152 774
Interest received 16 023 19 084 12 507
Finance costs paid (26 466) (21 104) (19 016)
Dividends paid (25 575) (24 776) (55 979)
Income taxes paid (24 399) (72 513) (97 022)
Net cash used in operating
activities (114 329) (103 808) (6 736)
Net cash used in investing
activities (24 747) (30 139) (39 121)
Net cash from financing
activities 41 560 14 538 26 249
Net decrease in cash and
cash equivalents (97 516) (119 409) (19 608)
Cash and cash equivalents at
beginning of the year 414 295 433 903 433 903
Cash and cash equivalents
at end of the period 316 779 314 494 414 295
Consolidated statement of changes in equity
Ordinary Ordinary Preference
share share share
capital premium capital
R000 R000 R000
Balance at 30 June 2003 779 58 494 -
Net profit for the year - - -
Shares issued in terms
of option scheme 17 3 010 -
Dividend paid - - -
Taiwan Depositary Receipts
(TDR) listing 16 12 112 -
TDR expenses written off - (489) -
Net foreign currency
translation reserve - - -
Balance at 30 June 2004 812 73 127 -
Net profit for the period - - -
Shares issued in terms of
option scheme 13 2 845 -
Dividend paid - - -
Preference share issued - - 265
Net foreign currency t
ranslation reserve - - -
Balance at 31 December 2004 825 75 972 265
Consolidated statement of changes in equity (continued)
Preference Accumulated Translation
share premium profits reserves Total
R000 R000 R000 R000
Balance at
30 June 2003 - 400 781 (2 998) 457 056
Net profit for
the year - 50 797 - 50 797
Shares issued
in terms of
option scheme - - - 3 027
Dividend paid - (50 161) - (50 161)
Taiwan Depositary
Receipts (TDR)
listing - - - 12 128
TDR expenses
written off - - - (489)
Net foreign
currency
translation
reserve - - (4 785) (4 785)
Balance at
30 June 2004 - 401 417 (7 783) 467 573
Net profit for
the period - 46 446 - 46 446
Shares issued in
terms of option
scheme - - - 2 858
Dividend paid - (5 575) - (25 575)
Preference
share issued 4 000 - - 4 265
Net foreign
currency
translation
reserve - - (2 374) (2 374)
Balance at
31 December
2004 4 000 422 288 (10 157) 493 193
Commentary
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 2004. 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
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
Business Segments R000 R000 R000
Revenue 1 346 225 636 897 610 799
EBITDA 93 725 46 004 36 893
Depreciation (8 840) (5 701) (2 909)
Goodwill amortisation (1 288) - -
Profit from operations 83 597 40 303 33 984
Income from investments 16 023 8 626 4 831
Finance costs (23 231) (13 095) (8 505)
Trade finance commission (3 235) (2 175) (1 060)
Exceptional items 2 239 - -
Income from associates 2 852 - -
Profit before tax 78 245 33 659 29 250
Income tax (expense)
benefit (23 600) (5 993) (11 505)
Profit after tax 54 645 27 666 17 745
Minority interest (8 199) 199 (6 563)
Net profit for the period 46 446 27 865 11 182
Group
Brother Comztek* invest- Elimina-
ments tions
Business Segments R000 R000 R000 R000
Revenue 59 503 51 208 - (12 182)
EBITDA 7 557 3 271 - -
Depreciation (86) (144) - -
Goodwill amortisation - - (1 288) -
Profit from operations 7 471 3 127 (1 288) -
Income from investments 1 905 661 - -
Finance costs (10) (1 621) - -
Trade finance commission - - - -
Exceptional items - - 2 239 -
Income from associates - - 2 852 -
Profit before tax 9 366 2 167 3 803 -
Income tax (expense)
benefit (3 007) (263) (2 832) -
Profit after tax 6 359 1 904 971 -
Minority interest (1 908) 73 - -
Net profit for the
period 4 451 1 977 971 -
*Comztek`s results have been proportionately consolidated from October 2004 to
December 2004.
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.
3. Operating results
Mustek`s major clients include corporate, governments, parastatals, retail and
an extensive dealer network.
Group revenue increased by 15% despite the effect that the strengthening rand
had on the selling prices of personal computers (`PCs`) and computer components.
The rand has strengthened by 12% compared to the comparative period and this
drove the average selling price of Mecer PC`s down. Total units sold during the
calendar year ending 31 December 2004 increased by 14,7% over the previous year.
The gross profit percentage reduced to 15,4% due to a more stable rand.
Income from associates decreased due to the disposal of Gijima Support Services
and the fact that 44,7% of Comztek was proportionately consolidated from October
2004 to December 2004.
4. Corporate activities
The company disposed of its investment in Gijima Support Services (Pty) Limited.
On 31 August 2004, the shareholders approved an empowerment transaction between
the company and Safika Holdings (Pty) Limited. In terms of the agreement, Safika
acquired 25% plus one share of the voting rights in Mustek on a poll, and will
acquire up to a cumulative maximum of 25% plus one share of the effective number
of issued shares in Mustek over the relevant period.
The company has approved capital expenditure for subsidiary Rectron Limited`s
new premises to the amount of R45 million, of which R31,5 million has been
incurred by 31 December 2004. The existing building will be disposed of.
5. Post-balance sheet events
The finalisation and awarding of the Government`s Seat management services
contract, has resulted in significant orders being received from various
government departments.
6. Board of directors
Vuli Cuba has been appointed to the Board of Mustek Limited as Non-Executive
Deputy Chairman on 7 October 2004.
7. 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 an interim dividend of 30 cents per
share for the period ended 31 December 2004 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 Wednesday, 16 March 2005
First day to trade ex dividend Thursday, 17 March 2005
Record date Thursday, 24 March 2005
Payment date Tuesday, 29 March 2005
No share certificates may be dematerialised or rematerialised between Thursday,
17 March 2005 and Thursday, 24 March 2005, 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
certificated 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.
8. Industry outlook
The ICT industry has entered into a high-growth and transformational phase. This
is supported by consumer confidence, hardware prices which are remaining steady
on the back of a stable rand, and the growing integration of computer hardware
with mobile technology and home entertainment systems.
Broadband
Broadband technologies such as ADSL and satellite transmission are changing the
way the world communicates and works. Companies can take advantage of always-on
connectivity and quick data transmission to digitally outsource non-core
activities.
Broadband is a key component of Microsoft`s push to moving personal and
enterprise computing beyond the PC into a distributed web-based environment.
This process will change the face of ICT as we know it now and will be a
powerful driver for all economies that can access it.
In South Africa, broadband still has a limited footprint and is relatively
expensive. The South African economy will only get into step with the developed
countries when sufficient and significantly cheaper broadband is rolled out.
Open Source
Until now, Mustek has concentrated on providing solutions based on Windows/Intel
platforms. Nevertheless, we are aware that Open Source software is moving
increasingly to centre stage, with the enthusiastic support of IT authorities
around the world and the South African government.
As Open Source becomes more widespread we anticipate that it should reduce the
cost of software to about 10% of Total Cost of Ownership (TCO) of PC systems.
Consumers using Open Source will then obviously be able to spend more on
hardware, which will certainly benefit suppliers such as Mustek.
Education initiatives
Education represents a major sector of opportunity for Mustek and other South
African suppliers of computer hardware. Current computer literacy levels are
extremely low when compared to the first world countries, and must be raised to
make South Africa`s economy globally competitive.
Government is well aware of this and is launching several initiatives at primary
and high school levels.
Mustek has developed educational software since 1994, in particular our award-
winning Inter-ED package. Inter-ED courseware facilitates the teaching of
numeracy, literacy and life skills in all 11 South African languages, and
includes a unique tool that enables teachers to assess their learners and
address problem areas.
Home use and entertainment
It is estimated that the home user market only represents 10% of the total PC
market in South Africa, compared to 50% in developed countries. The convergence
of technologies is now driving the home PC and the traditional home
entertainment centre into a single integrated unit. This will inevitably further
heighten demand for home PC`s and notebooks.
South Africa`s home user market has barely been tapped and offers huge upside
potential for future sales.
VOIP
The recent changes in legislation and the improvement in voice quality have put
VOIP (Voice Over Internet Protocol) firmly on everyone`s radar screen. There are
various levels of VOIP and each will impact the IT industry in different ways.
At the basic level we have PC To PC communication using the internet. This form
of VOIP is the most disruptive technology to the telecommunications industry as
calls are free over the public internet irrespective of distance. Whilst
broadband connections are recommended 56k dialup offers good enough voice
quality to entice users to use this medium. Typical providers are companies like
Skype. Skype software is a free download and allows for free calls to be made
from PC to PC. It allows PC to PSTN calls on a pre-paid basis and a call to the
USA would cost 2US cents per minute. Suppliers of broadband equipment, USB
handsets, headsets and PCs will benefit from the increased excitement around
this level
The next level up is phone to phone calls over the public internet and providers
like Vonage in the USA. Vonage and companies like Vonage are benefiting from the
large investments made in infrastructure during the dot com boom to provide low
cost calls. Equipment suppliers like Cisco and Juniper Networks benefit most
from this segment.
The next level is one where we have a fixed local network running Internet
Protocol throughout. In the USA home users running cable connections for their
TV programming can get VOIP telephony utilizing the same network. Corporate
users are also focusing their attention on this level. Local Area Networks LAN`s
running IP are increasingly being used as the telephone network and traditional
PABX suppliers are now offering IP based PABXs.
On behalf of the board of directors
David C Kan Hein Engelbrecht
Chief Executive Officer Financial Director
1 March 2005
9. Cororate information
Website: www.mustek.co.za or www.mecer.co.za
Company secretary
Neels Coetzee.
Transfer secretary
Computershare Investor Services 2004 (Proprietary) 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
Date: 01/03/2005 07:00:16 AM
Produced by the JSE SENS Department
