Mixed projections for Mustek

By Staff Writer for Mustek
Johannesburg, 20 Feb 2009

JSE-listed computing distributor Mustek expects to recover R21 million in the second half of its financial year after another foreign exchange beating.

The company`s trading statement, released yesterday, says profit margins are expected to increase by 2.4%, compared to last year`s increase of 5.5% in the same period. According to the statement, the company included the R84.7 million it lost on unrealised foreign exchange.

The company is an old hand at foreign exchange and has made losses on several occasions. In 2005, Mustek lost R62 million in trade and a further R41.3 million in 2006. Last year was the first of many where the company came out on top of foreign exchange, with R8.1 million.

As in 2006, the company says it has managed to recover most of the losses for this period through increased prices. It has also been aggressively cutting costs over the last half year, including a national restructuring programme, which will see the transfer of its coastal assembly and warehousing operations to its head office, in Midrand.

Mustek expects to recover another R21 million in the second half of the financial year.

Headline earnings per share are expected to be between 35% and 45% lower than last year`s 36.2c, and basic headline earnings are expected to take a 40% to 50% knock.

The decreases are not surprising, considering last year`s disappointing 0.8% growth of PC and notebook sales.

Good turnover

Despite the bleak operating margins, the company has projected an increase in gross profit of 18.6%, up from last year`s 16.4%. At last year`s interim results, the company showed a gross profit of R254 million.

Shareholders will also be pleased with the company`s projected turnover, expected to be 11.6% higher than the corresponding period last year, from R1.6 billion to R1.7 billion.

Mustek`s restructuring plans come in the wake of a global economic meltdown, which has many IT companies on the defensive at the moment. The company`s centralisation strategy is intended to dramatically cut company costs.

In an earlier interview with ITWeb, Mustek MD Hein Engelbrecht explained that all of the company`s coastal operations were being moved. A pilot migration was conducted last year at the company`s Free State branch.

Engelbrecht said last month that retrenchments could be part of the restructuring process; however, he assured customers that service and delivery would not be affected by the process.

The company hopes this course of action will help streamline the business.

Mustek is not the only company showing mixed interim results. Technology business Faritec released its interims this week, showing an economic whipping. It too is mulling job cuts alongside telecoms business Westcon.

Mustek`s full interims are expected around 27 February.