Mustek blames economy for hefty earnings decline

JSE-listed Mustek, currently the subject of a takeover bid by Novus Holdings, has reported a 74.3% decline in interim headline earnings per share (Heps), with management blaming the economy and other external factors for the poor performance.

Heps for the half-year ended 31 December 2024 was 23.47c, down from the 91.34c reported in the 2023 financial year. Revenue also slid, down 14.1% year on year to R3.7-billion. Operating profit fell by 47.1%, although gross profit rose by 13.8% as the result of a “more favourable product mix”.

“The group’s performance remained under pressure, reflecting the ongoing challenges posed by global and local economic conditions,” Mustek said in notes included with its interim results.

“These included persistent inflation, elevated interest rates, sluggish economic growth, and fluctuating consumer and investor confidence, both in South Africa and internationally.”

Mustek blamed the decline in revenue on “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 revenues 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,” it said.

Mustek reported foreign exchange losses of R28.2-million in the period, most of which are unrealised. It said that with the rand strength seen after the end of the reporting period, it is “possible that the majority of these losses will reverse”.

Spending controls

Improved budget management and stricter discretionary spending controls resulted in a 5.2% reduction in overall expenses, despite inflation affecting prices in various categories, it said. Finance costs remain a big focus for the group.

Inventory and receivables were reduced by 14% compared to the year-end in June 2024, declining from R2.35-billion to R2-billion over the six-month reporting period.

Read: Why Novus wants to buy Mustek – Q&A with CEO André van der Veen

Another positive is that a focus on working capital management helped generate nearly R700-million in cash in the period, compared to a R125.5-million cash outflow from operations in the year-ago interim results. This reduced the group’s overdraft to just R600 000, from R600-million at year-end in June.

Mustek is currently the subject of a mandatory takeover bid from JSE-listed printing and packaging group Novus Holdings. The IT group said the two companies will publish a joint circular on 14 March that will set out the terms of the offer to its shareholders.  – © 2025 NewsCentral Media

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