Mustek’s revenue and profit increased marginally for the six months ended 31 December 2017.
Revenue increased by 1,5% to R2,65-billion (31 December 2016: R2,61-billion).
The group attributes the slowdown in growth as a result of a decision by management to reduce its supply to retailers. This decision had a positive effect on the gross profit margin that increased from 12,6% to 13,2%.
The rand/dollar exchange rate was extremely volatile during the period under review and the group’s hedging policy proved effective as forex losses were limited to R3,9-million (31 December 2016: R3-million).
Distribution, administrative and other operating expenses from continuing operations were well controlled, increasing by 8,8%. The above-inflation increase was mainly caused by an increase in the provision for bad debts.
Net finance charges decreased from R45,3-million to R36,5-million mainly as a result of a reduction in inventory. Working capital management continues to be a driver of profitability and is currently receiving management’s full attention. The group applies hedge accounting where the requirements of IAS 39 have been met to separate the interest and spot elements from the forward contracts, and R3,1-million (31 December 2016: R9,9-million) was classified as finance costs, as opposed
to forex losses.
The contribution from associates increased, mainly due to an increase in the contribution from Sizwe Africa IT Group and a reduced loss incurred at Yangtze Optics Africa Holdings (YOA).
The group’s share of YOA’s equity accounted loss amounted to R0,8-million (31 December 2016: R2-million). Management believes this loss will be reversed in the period to June 2018.
Mustek’s headline earnings per share is 55,5% higher at 58.08 cents (31 December 2016: 37.34 cents) and basic earnings per share is 53,4% higher at 57.13 cents (31 December 2016: 37.24 cents).
The R48,6-million cash used in operations was mainly due to an increase in receivables and a decrease in accounts payable. This was funded by bank overdraft facilities and is expected to reverse in the period through to June 2018, in line with historic trends.
Inventory days improved by 17,2% to 70,,7 days (31 December 2016: 85,4 days).
Following an audit by an accredited verification agency, Mustek achieved a Level 1 BBBEE rating, using the amended ICT sector codes.