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MST
MST
MST - Mustek - Unaudited results for the six months ended 31 December
2006
MUSTEK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/070161/06)
Share code: MST & ISIN: ZAE000012373
("Mustek" or "the Group")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
- Interim dividend of 30 cents per share
COMMENTARY
1. Basis of presentation
These condensed financial statements for the six months ended 31 December
2006 are prepared in accordance with International Financial Reporting
Standards (IFRS) applicable to interim financial reporting (IAS 34), the
listing requirements of the JSE Limited and the Companies Act of South
Africa.
2 Accounting policies
The unaudited results for the six months ended 31 December 2006 have been
prepared in accordance with the Group`s accounting policies which comply
with IFRS. The accounting policies adopted are consistent with those
applied in the audited annual financial statements for the year ended 30
June 2006.
3. Audit report
Neither the consolidated financial results for the six months ended 31
December 2006 nor this set of summarised financial information has been
audited by the Group`s auditors and thus no audit report was issued.
4. Corporate governance
The Group subscribes to and complies in all material aspects with the
Code on Corporate Governance Practices and Conduct as contained in the
second King Report on Corporate Governance.
5. Transformation
Management has continued to meaningfully extend its initiatives in
employment equity, skills development and corporate social investment
during the period. The Group is committed to a process, of further
transformation and economic empowerment of its stakeholders, such that
acceptable balance between the operatives and commercial benefits of such
a process can be achieved thereby ensuring the sustainability of the
Group in a competitive market sector.
6. Board of directors
The board wishes to thank Tony Wang, Technology and International
operations director who will retire on 31 March 2007 when his contract
with the company expires. His valuable contribution made to the Group is
acknowledged and it wishes him well in his future endeavours.
7. Cash flow
Increased levels of receivables and inventory resulted in cash used in
operations of R327 million. In line with historic trends, this is
expected to reverse through to June 2007.
8. Operating results
Mustek`s major clients include corporate, government, parastatals, retail
and an extensive dealer network.
Mustek achieved another period of satisfactory operational results and
financial performance, despite severe fluctuations in the Rand/Dollar
exchange rate during the reporting period.
The Group`s gross margin from continuing operations increased to 18.2%
from 15.4% in the corresponding period.
Operating expenses were affected by forex losses incurred, expenses from
the Brazil operations and share-based payments expensed.
Mecer Brazil incurred a loss of R10.6 million. Mustek will continue its
scaled down operations in Brazil. No further capital will be invested
other than the original investment amount.
Mecer South Africa, Rectron, Brotek and Comztek performed as expected and
are positioned to continue doing so into the future.
The extension of Mustek`s securitisation arrangement for another five-
year period resulted in the movement of R160 million from short-term to
long-term borrowings.
9. Retirement benefit plan
The Mustek Group Retirement Fund is a defined contribution fund, payments
to the plan are charged as an expense as they fall due. The majority of
the group`s employees belong to this fund.
10. Industry outlook
The phase of transformation and growth experienced in the ICT industry is
expected to continue to at least until 2010.
Microsoft`s next generation operating system VISTA will replace the
current XP platform. The VISTA technology`s processing capability is
significantly faster and more secure than the current XP applications,
which will drive large-scale re-equipping of ICT infrastructure as VISTA
requires higher specifications of hardware and organizations who wish to
stay abreast of their competitors. Broadband continued to gain market
penetration in the South African market. Telkom`s DSL fixed line
technology remains by far the most used broadband technology in South
Africa at this time, and reduced costs of broadband will further
stimulate growth in this market, leading to demand for ICT products.
Current computer literacy levels are relatively low when compared to
first world countries and must be raised to make South Africa and Africa
globally more competitive.
South Africa`s home user and education market has barely been tapped and
offers huge potential for future sales in the medium to long term.
Various initiatives are being launched by international ICT companies
specifically focused on the underdeveloped markets of the world.
- Intel and AMD have reduced the prices of CPU`s substantially in recent
months.
- Intel launched its APC (Affordable PC) and AMD its UVC (Ultra value
clients) concept. The PC is designed to operate in a rigid environment,
at a price point that will be affordable to sectors of the market they
previously could not reach.
- Microsoft released Starter Pack, 63% cheaper than the home edition to
discourage piracy and reach a higher level of legal PC`s.
- Microsoft`s Flex-Go will be released soon, following a pay-as-you-go
concept for both software and hardware.
Microsoft launched its "Office ready" program which allows users to
experience its flagship product on a three-month trial basis. We believe
this will reduce piracy rates substantially in the Office range of
products.
We believe that the Mustek Group is well positioned to benefit from these
initiatives well into the future.
11. BEE transaction
The Board is currently assessing various proposals and will make an
announcement as soon as a decision has been taken on its preferred BEE
partners.
12. Group outlook
Growth prospects for the next six months are likely to be most influenced
by the extent of the rollout of equipment replacement by Government and
industry market retention and growth by Mustek, the volatility of the
currency and the demand for hardware and software.
13. 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 ordinary share for the period ended 31 December 2006 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 of trade
cum dividend Friday, 23 March 2007
First day to trade ex dividend Monday, 26 March 2007
Record date Friday, 30 March 2007
Payment date Monday, 2 April 2007
No share certificates may be dematerialised or rematerialised between
Monday, 26 March 2007 and Friday, 30 March 2007, 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 the payment date.
Shareholders who have dematerialised their shares will have their risk on
the 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.
14. Post-balance sheet events
A separate announcement regarding the cautionary announcement released on
26 February 2007 will be made once the details have been finalised.
On behalf of the board of directors
David C Kan
Chief Executive Officer
Wilson Vulindlela Cuba
Chairman
1 March 2007
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
Contact numbers: Telephone: +27 (0) 11 237-1000
Facsimile: +27 (0) 11 314-5039
e-mail: ltd@jhb.mustek.co.za
corporate information:www.mustek.co.za
Sponsor: Deloitte & Touche Sponsor Services (Proprietary)Limited
CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited
Unaudited Restated Audited
6 months 6 months Year-end
31 Dec 2006 31 Dec 2005 30 Jun 2006
R 000 R 000 R 000
Continuing
operations
Revenue 1 574 151 1 453 035 3 056 451
Cost of sales (1 288 134) (1 228 824) (2 553 827)
Gross profit 286 017 224 211 502 624
Other income 8 910 17 665 17 738
Distribution, (210 038) (157 532) (412 067)
administrative and
other operating
expenses
Share of profit 4 710 2 567 4 660
from associates
Profit from 89 599 86 911 112 955
operations
Investment revenues 12 703 14 563 28 946
Finance costs (35 464) (32 384) (63 846)
Other losses (346) - (624)
Profit before tax 66 492 69 090 77 431
Income tax expense (15 204) (10 794) (15 966)
Profit from 51 288 58 296 61 465
continuing
operations
Discontinued
operations
Profit (loss) from 860 (3 137) 13 128
discontinued
operations
Profit for the 52 148 55 159 74 593
period
Attributable to:
Equity holders of 44 309 47 891 61 821
the parent
Minority interest 7 839 7 268 12 772
52 148 55 159 74 593
Earnings and
dividend per share
(cents)
Ordinary shares in 109 090 732 106 740 511 107 514 661
issue
Weighted number of 108 667 008 105 757 304 106 595 794
ordinary shares in
issue
From continuing and
discontinued
operations:
Basic earnings per 40,78 45,28 58,00
ordinary share
Diluted basic 40,24 44,15 56,92
earnings per
ordinary share
Dividend per 25,00 30,00 65,00
ordinary share -
paid
Dividend per 30,00 35,00 25,00
ordinary share -
proposed
From continuing
operations:
Basic earnings per 40,25 47,24 49,89
ordinary share
Diluted basic 39,73 46,05 48,96
earnings per
ordinary share
Headline earnings
per share (cents)
From continuing and
discontinued
operations:
Headline earnings 41,09 45,28 44,15
per ordinary share
Diluted headline 40,56 44,15 43,33
earnings per
ordinary share
From continuing
operations:
Headline earnings 40,57 47,24 47,85
per ordinary share
Diluted headline 40,04 46,05 46,97
earnings per
ordinary share
Reconciliation
between basic and
headline earnings
Basic earnings 44 309 47 891 61 821
attributable to
equity holders of
the parent
Impairment of - - 298
goodwill
Group`s share of
profit on disposal
of subsidiaries and
other businesses - - (12 596)
Group`s share of
profit on disposal
of property,
plant and equipment - - (2 465)
Loss on dilution of 346 - -
joint venture
Headline earnings 44 655 47 891 47 058
Net asset value per 483,14 488,29 470,47
share (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited
Unaudited Restated Audited
6 months 6 months Year-end
31 Dec 2006 31 Dec 2005 30 Jun 2006
R 000 R 000 R 000
ASSETS
Non-current assets
Property, plant and 111 905 153 174 105 429
equipment
Intangible assets 11 686 3 867 11 735
Investments in 33 128 24 767 28 557
associates
Investment in joint 10 160 2 212 1 106
venture
Other investments and 27 294 26 938 26 868
loans
Deferred tax asset 31 935 27 870 30 330
Non-current trade and 10 197 21 210 22 116
other receivables
236 305 260 038 226 141
Current assets
Inventories 737 203 546 959 763 399
Trade and other 510 968 469 086 401 695
receivables
Foreign currency assets - - 10 599
Tax assets 11 737 12 464 10 814
Bank balances and cash 193 796 228 730 476 921
1 453 704 1 257 239 1 663 428
TOTAL ASSETS 1 690 009 1 517 277 1 889 569
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 873 854 860
Ordinary share premium 103 811 91 874 95 017
Preference share capital - 265 265
Preference share premium - 4 000 4 000
Retained earnings 415 584 422 548 398 848
Revaluation reserve 2 018 681 2 014
Foreign currency 4 773 981 4 819
translation reserve
Equity attributable to 527 059 521 203 505 823
equity holders of the
parent
Minority interest 77 433 63 351 69 594
Total equity 604 492 584 554 575 417
Non-current liabilities
Long-term borrowings 299 495 68 170 115 805
Deferred tax liabilities 380 241 808
299 875 68 411 116 613
Current liabilities
Short-term borrowings 15 386 241 231 173 470
Trade and other payables 627 404 558 970 976 556
Provisions 11 008 15 860 11 628
Foreign currency 3 891 4 102 5 655
liabilities
Deferred income 19 510 8 466 20 729
Tax liabilities 2 232 3 377 7 029
Loan from associate 563 - -
Bank overdrafts 105 648 32 306 2 472
785 642 864 312 1 197 539
Total liabilities 1 085 517 932 723 1 314 152
TOTAL EQUITY AND 1 690 009 1 517 277 1 889 569
LIABILITIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Unaudited
Unaudited Restated Audited
6 months 6 months Year-end
31 Dec 2006 31 Dec 2005 30 Jun 2006
R 000 R 000 R 000
Operating activities
Cash receipts from 1 461 150 1 515 588 3 211 073
customers
Cash paid to suppliers (1 788 480) (1 583 237) (2 989 010)
and employees
Net cash (used in) from (327 330) (67 649) 222 063
operations
Investment revenues 7 430 10 231 19 039
received
Finance costs paid (35 464) (32 069) (63 416)
Dividends received 5 273 4 347 9 937
Dividends paid (27 573) (31 810) (69 440)
Income taxes paid (22 944) (15 075) (19 429)
Net cash (used in) from (400 608) (132 025) 98 754
operating activities
Net cash (used in) from (12 734) (57 616) 11 962
investing activities
Net cash from (used in) 130 217 19 969 (32 197)
financing activities
Net (decrease) increase (283 125) (169 672) 78 519
in cash and cash
equivalents
Cash and cash 476 921 398 402 398 402
equivalents at
beginning of the year
Cash and cash 193 796 228 730 476 921
equivalents at end of
the period
Cash and cash 228 730 316 779 398 402
equivalents at end of
the period
CONDENSED SEGMENT ANALYSIS
Total Mecer Rectron Brotek
Business segments R 000 R 000 R 000 R 000
Continuing
operations
Revenue 1 574 151 751 755 698 661 73 585
EBITDA * 94 150 31 865 42 272 14 042
Depreciation (9 212) (4 174) (4 627) (141)
Amortisation of (49) (49) - -
intangible assets
Share of profit of 4 710 - - -
associates
Operating profit 89 599 27 642 37 645 13 901
Investment revenues 12 703 6 816 3 417 1 405
Finance costs (35 464) (17 436) (14 298) (920)
Other losses (346) - - -
Profit before tax 66 492 17 022 26 764 14 386
Income tax expense (15 204) (2 214) (7 907) (4 375)
Profit from 51 288 14 808 18 857 10 011
continuing
operations
Discontinued
operations
Profit from 860 - 860 -
discontinued
operations
Profit for the 52 148 14 808 19 717 10 011
period
Attributable to:
Equity holders of 44 309 14 808 11 882 10 011
the parent
Minority interest 7 839 - 7 835 -
52 148 14 808 19 717 10 011
*Earnings before interest, taxation, depreciation and amortisation
Total South Africa South America Mecer
East
Africa
Geographical R 000 R 000 R 000 R 000
segments
Continuing
operations
Revenue 1 574 151 1 424 721 67 235 5 529
Profit 51 288 59 089 (10 607) 1 139
(loss) from
continuing
operations
Discontinued
operations
Profit from 860 - - -
discontinued
operations
Profit 52 148 59 089 (10 607) 1 139
(loss) for
the period
Attributable
to:
Equity 44 309 52 741 (10 607) 1 139
holders of
the parent
Minority 7 839 6 348 - -
interest
52 148 59 089 (10 607) 1 139
CONDENSED SEGMENT ANALYSIS
Comztek Investments Eliminations
Business segments R 000 R 000 R 000
Continuing operations
Revenue 128 037 - (77 887)
EBITDA * 5 971 - -
Depreciation (270) - -
Amortisation of intangible - - -
assets
Share of profit of 94 4 616 -
associates
Operating profit 5 795 4 616 -
Investment revenues 1 453 - (388)
Finance costs (3 198) - 388
Other losses - (346) -
Profit before tax 4 050 4 270 -
Income tax expense (708) - -
Profit from continuing 3 342 4 270 -
operations
Discontinued operations
Profit from discontinued - -
operations-
Profit for the period 3 342 4 270 -
Attributable to:
Equity holders of the 3 338 4 270 -
parent
Minority interest 4 - -
3 342 4 270 -
*Earnings before interest, taxation, depreciation and amortisation
Rectron Australia Rectron UK Comztek Africa
Geographical R 000 R 000 R 000
segments
Continuing
operations
Revenue 63 753 - 12 913
Profit (loss) 1 779 - (112)
from continuing
operations
Discontinued
operations
Profit from - 860 -
discontinued
operations
Profit (loss) for 1 779 860 (112)
the period
Attributable to:
Equity holders of 586 566 (116)
the parent
Minority interest 1 193 294 4
1 779 860 (112)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attribu-
table
to
equity
Revaluation Translation holders Minority
of the
reserve reserves parent interest Total
R 000 R 000 R 000 R 000 R 000
Balance at 1 681 2 466 500 283 80 615 580
July 2005 898
Profit for - - 61 821 12 772 74 593
the year
Shares - - 6 865 - 6 865
issued in
terms of
option
scheme
Recognition - - 2 608 - 2 608
of share
based
payments
Dividends - - (69 440) - (69
paid 440)
Asset 1 333 - 1 333 275 1 608
revaluation
Net foreign
currency
translation
reserve
- foreign - 2 353 2 353 261 2 614
entities
Investments - - - (24 329) (24
in 329)
subsidiaries
Balance at 2 014 4 819 505 823 69 594 575 417
30 June 2006
Profit for - - 44 309 7 839 52 148
the period
Shares - - 5 700 - 5 700
issued in
terms of
option
scheme
Preference - - (4 265) - (4 265)
share
cancelled
Recognition - - 3 107 - 3 107
of share
based
payments
Dividends - - (27 573) - (27
paid 573)
Asset 4 - 4 - 4
revaluation
Net foreign
currency
translation
reserve
- foreign - (46) (46) - (46)
entities
Balance at 2 018 4 773 527 059 77 433 604 492
31 December
2006
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary Ordinary Preference Preference Retained
share share share share earnings
capital premium capital premium
R 000 R 000 R 000 R 000 R 000
Balance at 1 837 85 567 265 4 000 406 467
July 2005
Profit for - - - - 61 821
the year
Shares 23 6 842 - - -
issued in
terms of
option
scheme
Recognition - 2 608 - - -
of share
based
payments
Dividends - - - - (69 440)
paid
Asset - - - - -
revaluation
Net foreign - - - - -
currency
translation
reserve -
foreign
entities
Investments - - - - -
in
subsidiaries
Balance at 860 95 017 265 4 000 398 848
30 June 2006
Profit for - - - - 44 309
the period
Shares 13 5 687 - - -
issued in
terms of
option
scheme
Preference - - (265) (4 000) -
share
cancelled
Recognition - 3 107 - - -
of share
based
payments
Dividends - - - - (27 573)
paid
Asset - - - - -
revaluation
Net foreign - - - - -
currency
translation
reserve -
foreign
entities
Balance at 873 103 811 - - 415 584
31 December
2006
Date: 01/03/2007 17:15:03 Produced by the JSE SENS Department.
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