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Rand strength hurts Mustek


Johannesburg, 02 Sep 2004

PC manufacturer Mustek has reported headline earnings per share of 72.5c for the year to June, 38.9% down on the 118.65c of the previous year.

Revenue for the period slipped by 9.8% from R2.98 billion to R2.68 billion, while earnings before interest, tax, depreciation and amortisation fell by 41.7% from R234.48 million to R136.65 million.

CEO David Kan says while unit sales of Mecer PCs rose by 19%, group revenue fell because of the rand strengthening by an average of 24% over the previous year, driving down the average selling price of the Mecer PCs and accessories.

"Subsidiaries Rectron and Brother Business Machines performed well and managed to increase their gross profit percentages to compensate for decreased revenues due to the strengthening rand," Kan says.

Foreign exchange and derivative losses consisted of foreign exchange losses of R113.4 million, mainly due to the strengthening of the rand; a negative fair value adjustment of R4.2 million on an interest rate swap; an embedded derivative loss of R1.9 million; and a gain of R12.9 million due to the valuation of embedded derivatives in foreign payables.

Pre-tax profit fell from R195.5 million to R88.73 million, with the group`s net profit decreasing from R91.75 million to R50.8 million.

A dividend of 25c has been proposed, bringing the total for the year to 50c a share.

Kan says PC unit growth in SA continues to be positive and the group anticipates accelerated growth in the years ahead.

This is a result of replacement of Y2K equipment purchases which are now four years old, government`s education initiatives, increased PC demand from the home-user market, a new Microsoft operating system in 2006 requiring hardware upgrades, and black economic empowerment procurement.

"Mustek continues to explore opportunities, investments and partnerships in other regions, particularly in sub-Saharan Africa and other emerging markets as part of its globalisation strategy.

"Earnings remain sensitive to the strength of the rand against the US dollar, but will move positively with any weakening of the rand against the US dollar."

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