South African hardware distributor Mustek has attributed lower revenue for the financial year to June to the strong rand-dollar exchange rate.
The company posted its financial year-end results, which saw a 2.1% decrease in revenue, while gross profit was down to R485 million, from R565 million in 2009.
“Volumes increased by approximately 13%, but a significantly stronger average exchange rate of R7,61 to the US dollar compared to R9,05 in the previous financial year, negatively affected revenue and led to a 2.1% decrease to R3.41 billion,” explains the company.
Recent retrenchments have also impacted profits for these results; however, the company says the benefits of the retrenchments will be seen over the next financial year.
“A review of the overall structure has identified various inefficiencies and duplication of functions. Once-off retrenchment costs of R4.7 million negatively affected profitability and, as the process was only completed towards the middle of the financial year, the full benefit will only be achieved in the next financial year.”
Further benefits include improved working capital management and an elimination of inefficiencies and duplication. Distribution, administrative and other operating expenses (excluding foreign exchange profits and losses) decreased by 4.4%
However, net cash from operations was up: “A significant reduction in inventory levels and an increase in trade and other payables resulted in R230.5 million cash generated from operations (2009: R11 million).”
“Cash generated from the continued drive to further reduce inventory levels will be used to reduce short-term borrowings further. Mustek has also restructured its long-term finance facilities and were able to repay R207.5 million in long and short-term liabilities which will lead to significant interest savings in future,” predicts the company.
The company reported increased headline earnings per share of 19%, noting a dividend of 12c per share.
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