Mustek, the information technology group, yesterday admitted it might not see good growth in its 2024 financial year due to weak markets, but it planned an improvement in cash flow, reduced working capital and a stronger balance sheet.
The group, which provides technology products, solutions from software and cloud licences to networking, data centre solutions, surveillance, data storage and cloud computing, increased headline earnings a share 5% to 375.18 cents in the year to June 30, its results released yesterday showed.
Investors appeared to be positive on the group’s outlook, with the share price rising a substantial 7.96% to R15.60 yesterday afternoon, while the JSE All Share Index was up only 0.04% at the same time.
Revenue increased 13.7% to R10.13 billion, but gross profit fell 13.9%, only slightly less than the 14.3% decline in the past financial year.
The dividend was raised 1.3% to 77 cents a share.
“By focusing on sustainable and controlled growth, and maximising working capital efficiency, we remain poised to overcome market challenges and ensure the financial stability and success of the Mustek Group,” its directors said of the prospects for the new financial year.
Efficiencies would be enhanced through automation, data-driven decision making and streamlining processes to become leaner and more agile.
“Our investment in new product lines, such as cloud and cybersecurity solutions, networking equipment and sustainable energy, have contributed meaningfully to both revenue and profit”, and careful evaluation of other product opportunities would continue.
The directors said the group’s markets were experiencing a downturn, evident by several global OEM suppliers reporting revenue declines in the EMEA (Europe, Middle East, Africa) region.
“The potential lies within the expanded installed base, which has grown since pre-pandemic times. While an immediate overhaul of systems acquired during the Covid-19 period is desirable, a significant portion of the installations from 2019 are also due for an upgrade. The emergence of Generative AI is fostering a demand for intelligence at the edge,” directors said.
“Businesses are realising that to remain competitive, integrating AI into all aspects of their operations is imperative. However, challenges must be confronted. The cost of integrating computing into common objects is a significant hurdle. Security and privacy concerns also loom large.”
Additionally, managing the intricacies of dispersed computing power presented a challenge.
The “Compute in Everything” paradigm offered remarkable potential, but it was vital to address these challenges, the group said.
The results of the past year were achieved in a difficult economic environment compounded by the fragility of the electricity supply.
Other factors outside its control were severe exchange rate fluctuations that led to increased forex losses and a significant increase in interest rates which led to higher finance costs.
The two largest operational segments, Mustek and Rectron, grew revenue by 7.8% and 21.3% respectively, driven mainly by increased demand for sustainable energy products, which the group diversified into a few years ago.
The IT training company, Mecer Inter-Ed (MIE), contributed meaningfully to group revenue and profitability. Revenue of R98 million (R89.86m) was achieved by this segment.
The margin on the sale of sustainable energy products was higher than the traditional products distributed by the group, while the overall margin was impacted by pressures in the mobility category.
Margins were reduced on entry-level notebooks to reduce overstocking of that category noted in June 2022.
A key objective for the next financial year was working capital management and optimisation of cash flows, improved financial flexibility, improved management of finance costs, and sustained growth, directors said.
BUSINESS REPORT