Mustek suffers massive revenue loss

PC distributor Mustek has suffered a huge decline in revenue for the six months ended 31 December.

The JSE-listed company, which assembles and distributes personal computers and complementary ICT products, services and software in South Africa, announced its financial results today.

The firm’s distribution business encompasses the distribution of laptop brands, gaming equipment, printers, desktop and similar hardware.

According to the distributor, revenue decreased by 14% to R3.66 billion (31 December 2023: R4.27 billion) because of economic constraints, lower consumer demand and being selective in only pursuing deals that align with our risk appetite and profitability targets.

The group’s two largest segments Mustek and Rectron saw their revenue decline by 9.1% and 26% respectively.

The group’s IT training company, Mecer Inter-Ed experienced a slight decline in revenue to R43.4 million from R46.2 million from tougher market conditions, although the margin achieved was better than the comparative period.

The financial results come as JSE-listed printing and packaging firm Novus is looking to acquire Mustek.

Under the deal, Novus offered a cash consideration of R13 for each Mustek share, a cash amount of R7 plus one ordinary share in Novus for each Mustek share and two Novus shares for each Mustek share tendered by a mandatory offer participant.

Last week, the Competition Commission recommended that the Competition Tribunal approves, with conditions, the proposed transaction.

In a statement, Mustek says during the reporting period, the group’s performance remained under pressure, reflecting the ongoing challenges posed by global and local economic conditions.

The company explains that these included persistent inflation, elevated interest rates, sluggish economic growth, and fluctuating consumer and investor confidence, both in South Africa and internationally.

The group says it previously set out to improve working capital management and optimise cash flows.

It points out that ensuring efficient utilisation of resources, improved financial flexibility and reducing finance costs are key focus areas for the 2025 financial year.

“We are encouraged by the improvement in working capital since 30 June 2024, net finance costs and cash generated from operations, which is a result of our efforts to enhance liquidity and strengthen our financial position despite the difficult trading conditions,” says Mustek.

The company adds that the gross profit margin increased to 13.8% (2023: 13.4%), due to a more favourable product mix.

Basic earnings per share was 23.01 cents, down 74.72% (31 December 2023: 91.02 cents). Headline earnings per share was 23.47 cents, down 74.31% (31 December 2023: 91.34 cents).

“The fluctuating exchange rate has resulted in forex losses of R28.3 million at period end, the majority being unrealised,” says the firm.

“As the ZAR has strengthened against the USD post 31 December 2024, it is possible that the majority of these losses will reverse.”

It adds that associates contributed a profit of R5 million compared to a loss of R2.4 million in the comparative period. The prior period losses were mainly due to the poor performance of Zaloserve, Mustek explains.

The group disposed of its investment in Zaloserve during the period, which was disclosed as an asset-held-for-sale as at 30 June 2024. Khauleza has been able to break even and Continuous Power Systems, an associate that designs and manufactures a wide range of server cabinets and YOA, an associate that manufactures fibre optic cable, traded profitably.