Mustek powers on despite weak rand

Mustek, a listed distributor of ICT products and services, reported on Wednesday (28 August) a 16.3% rise in revenue from continuing operations in results for the year ended June 2013, despite a weakening of the local currency against the greenback.

Revenue of R4.072 billion was supported by headline earnings from continuing and discontinued operations at 3.9% higher to 72.85 cents per share.

Profit from operations improved marginally to R137.25 million, from R136.93 million.

The group upped its dividend 18% to 20 cents per share, from 17 cents in 2012.

Shares in Mustek climbed 20 cents, or 3.5% higher, in early trade on the JSE to R5.40. However, the group is off 6.9% over the past year from a high of R6.48.

Mustek cheered the addition of Acer and Lenovo to its product range over the reporting period, which it said assisted the revenue growth, but negatively impacted margins as these products are typically sold at lower margins.

The group noted that it expanded its basket of products with the introduction of multiple additions to the product portfolio offering, including Huawei Enterprise Solutions and Miniflex range of fibre cables, as well as solar panels.

Rand vs dollar

At 30 June 2012, the Rand was trading at R8.19 against the US Dollar – weakening to R9.96 by 30 June 2013.

This represents a 21,6% devaluation of the currency, and as an importer, Mustek said it incurs forex losses when the Rand weakens against the US Dollar.

During the year, Mustek changed its policy to cover two thirds of its US Dollar exposure; as a result, the comnpany managed to contain the forex losses to R50.5 million, from R47.8 million in 2012.

Industry outlook

Mustek pointed to ongoing industry debate around the future of the desktop.

“Our view, premised on our ongoing interactions with our customers and this rapidly changing industry, is that the desktop will continue to transition into different formats based on evolving market trends and customer requirements.”

The group said that a manifestation of this is the increasing uptake of the “All-in-One” format, proving popular in the banking and public sector markets due to its lower Total Cost of Ownership, and security benefits for the large percentage of desk-bound employees in these environments.

PC vs desktop

Mustek said that, for some time, sceptics have argued that the PC will be replaced with newer devices such as the tablet.

Apple dominates this form factor and Mustek pointed out that it was excluded from that growth opportunity.

“However, statistics indicate that the other brands are catching up and Apple is steadily losing its tablet dominance,” it said.

“We believe that Mustek will become a key player in the local tablet market for the other brands. Over the next few years, this is likely to be a positive revenue driver.”

The group highlighted the recent launch of its Cloud offering. “We have also experienced another year of strengthening our strategic partner network within the industry,” it said.

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Mustek powers on despite weak rand