Mustek sees 13.6% drop in headline earnings

IT distributor, Mustek on Tuesday (28 August) posted a 13.6% drop in its headline earnings per share (HEPS) for the year ended June 2012, to 71.37 cents citing rand volatility.

Revenue from continuing operations however, increased by 20.9% to R3.503 billion, compared to R2.897 billion in 2011.

Profit from operations  rose modestly to R136.929 million, from R135.576 million in 2011, while overall profit declined to R77.799 million, from R96 million.

Mustek’s board maintained a final dividend declaration at 17 cents per share.

“The addition of Acer and Lenovo to our product range over the past 12 months assisted the revenue growth but negatively impacted margins as these products are typically sold at lower margins,” Mustek said.

Included in profit from operations from continuing operations is R47.8 million relating to realised and unrealised foreign exchange losses, from a prior profit of  R12.0 million.

The group uses the Rand/USD spot rate at the beginning of each month to determine its selling prices, with adjustments made during the month should the exchange rate change substantially.

“As long as this is the case, and the Rand remains as volatile as it currently is, reported earnings will be in line with the volatilities of the Rand,” Mustek said.

Mustek grew its revenue by 42.5%, after adding new products and a renewed focus on its customers ensured growth in all sectors.

Subsidiary, Rectron, grew its full year revenue by 5.7% after it reported a decline of 6.5% for the six months to December 2011. The transition in the CEO leadership at Rectron, with the appointment of Lindi Shortt, has gone smoothly, Mustek said.

Industry outlook

“We are positive that the PC industry will see growth in the coming years, especially in Africa, Mustek said. It notes that users who own a PC for three years typically spend 30% on hardware and 70% on internet connectivity.

“We have no doubt that the connectivity costs will continue to become more affordable, enabling users to spend more on hardware,” it said.

Looking ahead Mustek said it will continue to support and invest in desktop computing, notebooks and ultrabooks. “The soon to be launched Windows 8 Operating System will create possibilities for sleek and exciting technology innovations.”

Company outlook

Mustek says it is placing increased focus on working capital management in order to reduce finance costs.
With the addition of Acer and Lenovo to Toshiba and Mecer over the past 18 months, Mustek says it has become one of the most preferred distributors for the local reseller community to do business with.

“We look forward to increasing our market share and the average spend per customer, by building on our established and trusted after sales service and support programme for our valued customers.

“Mustek’s outlook remains focused on sustainable growth. Opportunities for further optimisation, improved production, further consolidation and cost management are being pursued. Enhanced cash flow will be used prudently to reduce our debt,” it concluded.

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Mustek sees 13.6% drop in headline earnings