| Thu 1 Sep 2005, 18:10 | | Mustek Limited - Audited financial results for the |
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Mustek Limited - Audited financial results for the year ended 30 June 2005
Mustek Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST ISIN: ZAE000012373
(`Mustek` or `the Group`)
Audited financial results for the year ended 30 June 2005
Total dividend of 60 cents per share
Bank balances and cash of R398 million
CONSOLIDATED INCOME STATEMENT
Restated
2005 2004
R000 R000
Revenue 2 942 244 2 683 978
Cost of sales (2 469 795) (2 201 310)
Gross profit 472 449 482 668
Distribution, administrative and
other operating expenses (281 890) (228 238)
Foreign exchange and derivative losses (15 698) (117 661)
EBITDA* 174 861 136 769
Depreciation (16 548) (17 169)
Amortisation of intangible assets (564) (5 738)
Profit from operations 157 749 113 862
Income from investments 32 534 42 692
Finance costs (47 687) (42 760)
Trade finance commission (8 806) (7 091)
Exceptional items 12 034 (20 171)
(Loss) income from associates (567) 1 703
Profit before tax 139 405 88 235
Income tax expense (42 510) (32 068)
Profit after tax 96 895 56 167
Minority interest (13 621) (6 089)
Net profit for the year 83 274 50 078
* EBITDA - earnings before interest,
taxation, depreciation and amortisation
Weighted average number of ordinary
shares in issue 103 723 755 100 010 307
Number of ordinary shares in issue 104 643 639 101 566 618
Net asset value per share (cents) 475,65 448,96
Headline earnings per ordinary
Share (HEPS) (cents) 90,36 71,79
Basic earnings per ordinary
share (BEPS) (cents) 80,28 50,07
Diluted headline earnings per ordinary
share (cents) 87,03 68,15
Diluted basic earnings per ordinary
share (cents) 77,32 47,54
Dividend per ordinary share - paid (cents) 55,00 50,00
Dividend per ordinary share - proposed
(cents) 30,00 25,00
* Prior year HEPS and BEPS has previously been reported as 72,50 and 50,79
respectively
Reconciliation between basic and
headline earnings R000 R000
Basic earnings (Net profit for the year) 83 274 50 078
Impairment and amortisation of goodwill 5 852 5 124
Group`s share of profit on disposal of
subsidiaries and other businesses (3 950) (155)
Profit on disposal of associate (2 239) -
Impairment of associates 10 793 16 746
Headline earnings 93 730 71 793
CONSOLIDATED BALANCE SHEET
Restated
2005 2004
R000 R000
ASSETS
Non-current assets 227 432 166 790
Property, plant and equipment 140 610 58 096
Intangible assets 3 598 4 277
Investments in associates 21 274 60 068
Investment in joint venture 830 -
Other investments and loans 26 434 13 797
Non-current trade receivables 13 233 -
Deferred taxation asset 21 453 30 552
Current assets 1 465 459 1 268 211
Inventories on hand 556 118 459 772
Inventories in transit 55 159 50 178
Trade and other receivables 434 122 328 747
Foreign currency assets 6 304 -
Tax assets 15 354 15 219
Bank balances and cash 398 402 414 295
TOTAL ASSETS 1 692 891 1 435 001
EQUITY AND LIABILITIES
Capital and reserves 497 734 455 992
Share capital 837 812
Share premium 81 270 73 127
Preference share capital 265 -
Preference share premium 4 000 -
Accumulated profits 415 998 389 836
Revaluation reserve 681 -
Foreign currency translation reserve (5 317) (7 783)
Minority interest 80 079 66 471
Non-current liabilities 245 799 229 130
Long-term borrowings 245 330 229 130
Deferred tax liability 469 -
Current liabilities 869 279 683 408
Foreign currency liabilities - 27 988
Trade and other payables 775 273 601 154
Short-term borrowings 61 931 4 317
Deferred income 9 144 13 317
Tax liabilities 2 652 2 098
Bank overdrafts 20 279 34 534
TOTAL EQUITY AND LIABILITIES 1 692 891 1 435 001
CONSOLIDATED CASH FLOW STATEMENT
Restated
2005 2004
R000 R000
Operating activities
Cash receipts from customers 2 864 120 2 715 847
Cash paid to suppliers and employees (2 744 938) (2 565 761)
Net cash from operations 119 182 150 086
Interest received 26 944 12 507
Finance costs paid (55 843) (19 016)
Dividends received 5 590 -
Dividends paid (57 112) (55 979)
Income taxes paid (30 146) (97 022)
Net cash from (used in) operating
activities 8 615 (9 424)
Net cash used in investing activities (70 257) (39 121)
Net cash from financing activities 45 749 28 937
Net decrease in cash and cash
equivalents (15 893) (19 608)
Cash and cash equivalents at beginning
of the year 414 295 433 903
Cash and cash equivalents at end
of the year 398 402 414 295
SEGMENT ANALYSIS
Total Mecer Rectron Brother
Business segment R000 R000 R000 R000
Revenue 2 942 244 1 398 287 1 273 159 131 338
EBITDA 174 861 96 675 59 496 12 801
Depreciation (16 548) (9 811) (6 054) (286)
Amortisation of
intangible assets (564) (564) - -
Profit from
operations 157 749 86 300 53 442 12 515
Income from
investments 32 534 18 589 8 758 3 508
Finance costs (47 687) (27 195) (15 917) (17)
Trade finance
commission (8 806) (5 799) (3 007) -
Exceptional items 6 182 (74) 3 932 -
(Loss) income from
associates (567) - - -
Profit before tax 139 405 71 821 47 208 16 006
Income tax expense (42 510) (13 642) (18 250) (5 059)
Profit (loss) after
tax 96 895 58 179 28 958 10 947
Minority interest (13 621) 314 (11 289) (3 284)
Net profit (loss)
for the year 83 274 58 493 17 669 7 663
Mecer
Mecer East
Total South Africa Brazil Africa
Geographical segments R000 R000 R000 R000
Revenue 2 942 244 2 664 255 79 826 12 336
Profit (loss) after
tax 96 895 111 792 (3 255) (640)
Minority interest (13 621) (17 284) - 314
Net profit (loss)
for the year 83 274 94 508 (3 255) (326)
SEGMENT ANALYSIS (continued)
Comztek* Investments Eliminations
Business segment R000 R000 R000
Revenue 170 576 - (31 116)
EBITDA 5 889 - -
Depreciation (397) - -
Amortisation of
intangible assets - - -
Profit from
operations 5 492 - -
Income from investments 2 074 - (395)
Finance costs (4 953) - 395
Trade finance commission - - -
Exceptional items - 2 324 -
(Loss) income from
associates 103 (670) -
Profit before tax 2 716 1 654 -
Income tax expense (368) (5 191) -
Profit (loss) after tax 2 348 (3 537) -
Minority interest 638 - -
Net profit (loss) for
the year 2 986 (3 537) -
*Comztek`s results have been proportionately consolidated from
1 October 2004 to 30 June 2005.
Rectron Rectron Comztek
Australia UK Africa
Geographical segments R000 R000 R000
Revenue 104 965 70 733 10 129
Profit (loss) after tax 621 (9 996) (1 627)
Minority interest (717) 3 415 651
Net profit (loss) for
the year (96) (6 581) (976)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Preference Preference
share Share share share
capital premium capital premium
R000 R000
Balance at 30 June 2003
as previously stated 779 58 494 - -
Restatement - -
Restated balance at
30 June 2003 779 58 494 - -
Net profit for the year - - - -
Shares issued in terms
of option scheme 17 3 010 - -
Dividends paid - - - -
Taiwan Depositary Receipts
(TDR) listing 16 12 112 - -
TDR expenses written off - (489) - -
Net foreign currency
translation reserve -
foreign entities - - - -
Balance at 30 June 2004
as previously stated 812 73 127 - -
Restatement - - - -
Restated balance at
30 June 2004 812 73 127 - -
Net profit for the year - - - -
Shares issued in terms of
option scheme 25 8 143 - -
Preference shares issued - - 265 4 000
Dividends paid - - - -
Asset revaluation - - - -
Net foreign currency
translation reserve -
fireign entities - - - -
Balance at 30 June 2005 837 81 270 265 4 000
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Accu- Re- Trans-
mulated valuation lation
profits* reserve reserves Total
R000 R000 R000 R000
Balance at 30 June 2003
as previously stated 400 781 - (2 998) 457 056
Restatement (11 037) - - (11 037)
Restated balance at
30 June 2003 389 744 - (2 998) 446 019
Net profit for the year 50 078 - - 50 078
Shares issued in terms
of option scheme - - - 3 027
Dividends paid (50 161) - - (50 161)
Taiwan Depositary Receipts
(TDR) listing - - - 12 128
TDR expenses written off - - - (489)
Foreign currency
translation reserve -
foreign entities - - (4 785) (4 785)
Balance at 30 June 2004 389 661 - (7 783) 455 817
Restatement 175 - - 175
Restated balance at
30 June 2004 389 836 - (7 783) 455 992
Net profit for the year 83 274 - - 83 274
Shares issued in terms
of option scheme - - - 8 168
Preference shares issued - - - 4 265
Dividends paid (57 112) - - (57 112)
Asset revaluation - 681 - 681
Net foreign currency
translation reserve -
foreign entities - - 2 466 2 466
Balance at 30 June 2005 415 998 681 (5 317) 497 734
*Prior year opening retained income has decreased by R13,7 million (AC 105),
R2,7 (IAS 39) and R5,5 million (IAS 38) and increased by R10,9 million (AC 501).
*Current year opening retained income increased by R175 thousand due to the
reversal of negative goodwill (IFRS 3)
COMMENTARY
1. Accounting policies
These consolidated abridged financial statements for the year ended 30 June 2005
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 2004, with the exception
of the adoption of AC 501 Accounting for Secondary Tax on Companies (STC), early
adoption of IAS 39 Financial instruments: Recognition and measurement, the
adoption of IFRS 3 Business combinations, the related adoption of IAS 36
Impairment of assets and IAS 38 Intangible assets and changing the basis of
accounting for land and buildings from a cost to a revaluation model.
The first time adoption of AC501 has the effect that a deferred tax asset of
approximately R7,9 million (2004: R9,7 million) has been raised on the Group`s
unutilised STC credits of approximately R62,9 million at year end (2004: R77,8
million). The statement was applied retrospectively and the effect on the
current year income statement has been a tax charge of R1,9 million (2004: R1,2
million).
The early adoption of IAS39 has the effect that the previously booked third
currency derivative of approximately R0,5 million has been reversed. The
statement was applied retrospectively and prior year results have been restated
accordingly.
The Group has previously been accounting for operating leases in a manner widely
regarded as accepted practice within the South African environment. The policy
applied by the company involved expensing and recording operating lease expenses
as and when incurred. SAICA issued circular 7/2005, on 3 August 2005, effective
immediately, detailing practice in the past and the revised correct treatment
thereof. The restatement has the effect that opening retained earnings has been
adjusted by approximately R13,8 million and the operating lease charges for the
current year have increased by R2,8 million (2004: R2,7 million).
A further area that has been revisited centres on the amortisation of intangible
assets. The restatement has the effect that opening retained earnings have been
adjusted by approximately R5,5 million. The current year amortisation charge is
R564 thousand. The closing balance of intangible assets, excluding goodwill, in
the current year is R393 thousand (2004: R526 thousand).
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 2005 year. Headline earnings per share is calculated by
dividing headline earnings by the weighted average number of ordinary shares in
issue during the year. 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
Group revenues increased by 9,6% despite the Rand strengthening by an average of
9,8% compared to the comparative period.
The Group`s gross profit percentage decreased to 16,1% (2004: 18,0%) due to the
bigger contributions from the international operations which trade at much lower
margins than the local operations.
Distribution, administrative and other operating expenses increased in line with
expectations when taking into account that proportionately consolidating Comztek
increased distribution, administrative and other operating expenses by
R18,5million and the fact that Mecer Brazil was operational for a full year
which had a R6,5million effect.
Foreign exchange and derivative losses include unrealised losses of R15,2
million on the revaluation of accounts payable at year end. Some of these
losses are expected to be recovered in the new financial year through higher
selling prices.
Exceptional items consists of impairment of investments and loans of R5,6
million, profit on disposal of associate of R2,2 million, impairments of
associates of R10,8 million, increase in fair value of an investment of R22,3
million, profit on disposal of shares in subsidiaries and businesses of R5,3
million, impairment of goodwill of R5,9 million and other write-offs of R1,4
million.
Included in the income tax charge is an amount of R5 million from Rectron
relating prior periods being reassessed.
The South-African operations performed in line with expectation despite the
effect that the stronger Rand had on selling prices of PCs, components and
peripherals.
The start-up operation, Mecer Brazil incurred a loss of R3,3 million in its
first full year of operation. Revenue growth has been phenomenal. Additional
management from South Africa has been introduced to streamline processes. The
Group`s share of Rectron UK`s losses amounted to R6,6 million as a result of new
management making various write-offs to slow and obsolete stock as well as long
outstanding accounts receivable.
5. Cash flow
Focused working capital management resulted in net cash from operations of
R119,2 million (2004: R150,1 million). Despite dividend payments of R57,1
million (2004: R56,0 million), bank balances and cash remained strong at R398,4
million. (2004: R414,3 million)
6. Corporate activities
The company disposed of its investment in Gijima Support Services (Pty) Limited.
A reconstitution of Comztek`s board resulted in Mustek obtaining joint control
and proportionately consolidating 44,7% of Comztek`s results from 01 October
2004.
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 have the ability to acquire up to a cumulative maximum of 25% plus one
share of the effective number of issued shares in Mustek over the relevant
period.
7. Transformation
Management has meaningfully extended its initiatives in employment equity,
skills development and corporate social investment during the year. The Group is
committed to continuing a process of further transformation and economic
empowerment of its stakeholders, such that an acceptable balance between the
imperatives and commercial benefits of such a process can be achieved, thereby
ensuring the sustainability of the Group in a competitive market sector.
8. Board of directors
The board wishes to thank Mr. CC Kan who resigned as chairman of the board on 31
March 2005 for his valuable contribution made to the Group since inception in
1987 and wishes him well in his future endeavors. The board would also like to
welcome Sindi Mabaso who has been appointed as independent non-executive
director on 15 May 2005 and congratulate Mr. Vuli Cuba on his appointment as non
executive chairman on 25 July 2005.
9. 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 final dividend of 30 cents per
ordinary share for the period ended 30 June 2005 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 final
dividend are as follows:
Last day to trade cum dividend Friday: 23 September 2005
First day to trade ex dividend Monday: 26 September 2005
Record date Friday: 30 September 2005
Payment date Monday: 3 October 2005
No share certificates may be dematerialised or rematerialized between Monday, 26
September 2005 and Friday, 30 September 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.
10. 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, the growing integration of computer
hardware with mobile technology and home entertainment systems and the business
replacement cycle.
Broadband technologies such as ADSL and satellite transmission are changing the
way the world communicates and works. Broadband is a key component of
Microsoft`s push to moving personal and enterprise computing beyond the PC into
a web based environment. This process will change the face of ICT as we know it
now and will be a powerful driver of all economies that can access it.
Education represents a major sector of opportunity for Mustek and other South
African and African suppliers of computer hardware. Current computer literary
levels are extremely low when compared to first world countries and must be
raised to make South Africa and Africa globally competitive. Various initiatives
are being launched to address this, both from Government and the private sector.
South Africa`s home user market has barely been tapped and offers huge potential
for future sales. The convergence of technologies is now driving the home PC
and the traditional home entertainment centre into single integrated unit. This
will inevitably further heighten demands for home PC`s and notebooks.
We are now also seeing users replacing Y2K infrastructure purchases as products
reach the end of their life cycles. In replacing infrastructure many enterprises
are not simply replacing like for like, but are using the opportunity to
implement strategic infrastructure decisions.
Requirements are increasing on businesses in South Africa to demonstrate their
support for locally produced goods and procurement from Broad Based Black
Economic Enterprises. We believe that the Mustek Group is well positioned to
benefit from these requirements.
11. Post balance sheet events
There have been no significant events subsequent to year-end up until the date
of this report that require adjustment or disclosure.
On behalf of the board of directors
David C Kan
Chief Executive Officer
Hein Engelbrecht
Financial Director
01 September 2005
Corporate information
Company secretary:
Neels Coetzee
Transfer secretaries: 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: PO Box 1638, Parklands, 2121
Sponsor: Deloite & Touche Sponsor Services (Pty) Limited
Date: 01/09/2005 05:15:44 PM
Produced by the JSE SENS Department
