Mustek lifts profit as it taps into SA fibre growth

Mustek on Thursday reported an 8.2% lift in revenue for the year ended June 2018, to R5.67 billion, mainly as a result of strong growth in new products and services added to its portfolio over the last five years.

The main business of Mustek, its subsidiaries, joint ventures and associates is the assembling, marketing and distribution of Information Communication Technology (ICT) products and services.

Mustek’s headline earnings per share was 28.2% higher at 104.15 cents and basic earnings per share climbed 27.7% to 102.58 cents (2017: 80.32 cents).

Profit from operations, however, dropped to R163 million from R174 million.

The gross profit percentage increased to 14.0% (2017: 12.6%) predominantly due to reduced sales to mass retailers and a reduction in aged stock that sells at lower margins, Mustek said.

A dividend per share was up 37.5% to 22.00 cents, from 16.00 cents in 2017.

Mustek noted that the rand depreciated by 16.7% or R1.96 against the dollar during the last quarter of the financial year. “This sudden movement negatively impacted the results and unrealised forex losses of R42.7 million (2017: R3.5 million) were recorded and included as part of foreign currency losses.

“A substantial portion of this loss will be recovered through a combination of higher selling prices and forward exchange contracts entered into after year-end at amounts lower than the 30 June 2018 closing rate of R13.71,” it said.

Distribution, administrative and other operating expenses increased by 11.7%.

Looking ahead, Mustek said that investments in new product lines such as networking equipment, sustainable energy and fibre are starting to contribute meaningfully to both revenue and profit.

“The growth in fibre to the home is not only assisting our fibre sales, but also increasing the demand for new devices in order to fully benefit from the faster internet speeds.”

The group said it will continue to look for opportunities to add additional products to its product offering in order to better utilise its infrastructure. “The contributions from products such as Huawei are expected to continue growing and although the gross profit margin might be lower for these products, net profit should increase.”

The smart education and learning market is expected to grow as more education institutions realise the importance of digitisation in the mobile and connected world, Mustek said. “We are excited to be able to support schools and universities with digital education deployment and to assist them in taking advantage of this growth opportunity.”

“Although economic and market conditions are expected to remain difficult, the increased contribution from our associates and the reduction in net finance costs as a result of lower inventory levels at both Mustek and Rectron  should contribute to higher profitability,” the group said.

Shares in Mustek have climbed steadily over the past year from R4.70, to a current price of R6.90, giving the group a market cap of just over R502 million.

Read: Mustek appointed as Apple B2B partner for South Africa

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Mustek lifts profit as it taps into SA fibre growth