Despite tricky economic conditions locally, demand into the next financial year is likely to be satisfactory, says JSE-listed computer manufacturer Mustek.
Reporting its annual results to end June 2006 yesterday, it said growth prospects for the next financial year are likely to be influenced by how far government and industry go in rolling out equipment replacement. In addition, Mustek`s ability to retain market share will impact on future results.
It also pointed to negative factors such as the "volatile" currency and increased interest rate levels, factors that are affecting spending power. However, "it is anticipated that the continued focus on product supply and availability, coupled with marketing initiatives, will stimulate demand and result in satisfactory performance by the group".
Moreover, various changes in the marketplace, such as Microsoft`s new Vista operating system, are expected to boost sales going forward.
During the year, Mustek acquired the 30% of Brother Business Machines (Brotek) that it did not own, and subsequently funded the sale of this stake to a broad-based black economic empowerment consortium. The company is also reviewing its empowerment transaction with Safika Holdings and Mduduzi Edward Gama.
`Satisfactory` results
Mustek, which reported under IFRS for the first time, said revenue was up to R3 billion from R2.8 billion in the previous year. Profit before tax, however, was down at R77 million from R144.9 million. It declared a final dividend of 25c a share.
Its focus on working capital management resulted in cash flows from operations of R222 million. Bank balances and cash were at R477 million due to focused working capital management and the disposal of the Rectron buildings. Rectron sold its Johannesburg and Durban buildings for R95 million and discontinued its UK operation.
Mustek, which has clients in the corporate, government, parastatal and retail sectors, said its operational results were "satisfactory". The increase in group revenue from continuing operations of 8% was assisted by 10% increase in total units of Mecer PCs sold, the contribution from the international operations and the proportionate consolidation of Comztek for the full 12-month period.
It added that its margin from continuing operations remained consistent, but "operating profit margin was severely affected by unrealised foreign exchange losses".
Higher selling prices
"The sudden and sharp depreciation of the rand during the six weeks prior to year-end resulted in Mecer having to account for R41.3 million unrealised foreign exchange losses and Rectron R26.1 million on the revaluation of accounts payable at year-end."
However, some of these losses are expected to be recovered in the new financial year through higher selling prices and the strengthening of the rand after the end of the financial year.
Mustek said it is mulling whether to continue operating in Brazil as, while this division reported revenue growth of 45%, the operation reported a loss of R12.2 million as a result of low gross margins and a lack of manufacturing experience.
Rectron`s loss-making UK operation has been discontinued, resulting in losses of R24 million and a profit on discontinuance of R19.1 million. Brotek and Comztek have shown a "substantial" improvement in performance and are "positioned to repeat this into the future".
Mustek`s share closed at R9.50 yesterday, unchanged from Wednesday`s close. Its 12-month high is R12 and its 12-month low is R8.71.
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