Mustek has hiked headline earnings per share by 55.5% in the six months to 31 December 2017, though revenue climbed by only 1.5% to R2.6bn.
The slower revenue growth was due to a decision to reduce the supply of technology products to retailers, which had a positive effect on gross margin, which rose from 12.6% to 13.2%, Mustek said.
Distribution, administrative and other operating expenses from continuing operations were “well controlled”, increasing by 8.8%. The above inflation increase was mainly caused by an increase in the provision for bad debts.
Net finance charges decreased from R45.3m to R36.5m, mainly as a result of a reduction in inventory.
“Working capital management continues to be a driver of profitability and is currently receiving management’s full attention,” the company said.
It used R48.6m in cash from operations due to an increase in receivables and a decrease in accounts payable. This was funded by bank overdraft facilities and is expected to reverse in the period to 30 June 2018, in line with historic trends.
Inventory days improved by 17.2% to 70.7 days.
In notes alongside the financial results, Mustek said it is well positioned in the communication, mobility and energy segments with its Huawei Enterprise portfolio offering and Hytera, a provider of radio communication technology.
“We have several best-in-class brands and products to service the mobility market including Lenovo, Acer, Apple, Asus and Toshiba. Our renewable energy division is showing good, steady growth and our fibre-optic cabling partner, YOA, is expected to contribute meaningfully in the years ahead.”
The smart education and learning market is also expected to grow as more education institutions realise the importance of digitisation, it said.
“As an early adopter of 3D printing, we expect this product line to show growth in the coming years as the line-up becomes mainstream. The document scanning market is expected to grow at a compound annual growth rate of 13.8% until 2020 and we are excited to support our partners, Epson, Brother and Fujitsu to take advantage of this growth.”
The company also hopes to take advantage of the growth in PC gaming and e-sports and has added brands like MSI to meet demand. However, high demand for graphics cards because of cryptocurrency mining has meant that supply is outstripping demand.
“Although economic and market conditions are expected to remain difficult, the increased contribution from our associates and the reduction in net finance costs as a result of lower inventory levels at both Mustek and Rectron, should contribute to higher profitability,” it said. “Lower inventory levels should also have a positive effect on gross profit margins.” — (c) 2018 NewsCentral Media