JSE-listed technology group Mustek reported a 9.4% increase in revenue in the year ended 30 June 2020, in spite of three months of the reporting period including the Covid-19 lockdown in South Africa.

Revenue was R6.4-billion, from R5.85-billion the year before.

Gross profit margin also expanded, increasing to 14.2% from 14% previously, while operating profit fell by 7.6% to R201-million. Headline earnings per share — a closely watched measure by South African investors — declined by 8.7% to 127.13c.

“The group had an exceptional trading performance over the nine months preceding the lockdown, with our diversified portfolio of products and services providing a clear advantage in the marketplace,” it said in commentary alongside the results.

“After limited trade during April 2020, revenue continued on this positive growth trajectory during the last two months of the financial year due to surging demand sparked by remote working requirements.”

It generated strong cash flows, with R500-million cash generated from operations, mainly due to an increase in trade and other payables.

‘Ideally placed’

Mustek, which is led by founder and CEO David Kan, said it is “ideally placed in an industry likely to benefit highly from the ‘new normal’ that includes working from home and remote learning across the basic education and higher education sectors”.

“Our investments in new product lines such as networking equipment, sustainable energy and fibre are starting to contribute meaningfully to both revenue and profit. Growth in fibre to the home is not only assisting our fibre sales, but also increasing the demand for new devices in order to fully benefit from the faster Internet speeds.”

The group declared a final gross dividend of 26c/share, from 30c previously.

Mustek disclosed in the results that it is seeking claims from its insurers over the impact of the Covid-19 lockdown on its business. Its all-risks policy includes “loss of gross profit following business interruption triggered by specified perils”.

“The business interruption section has been extended to include a contagious disease extension limited to R10-million for Mustek and R5-million for (Mustek subsidiary) Rectron. The group’s brokers believe that the extension has been triggered and have notified a claim to the underwriters…

“The general market position to date is that insurers believe that the lockdown and the outbreak of the virus are two separate events. To date, the claim has not been repudiated and we believe that insurers are awaiting the outcome of litigation that is presently under way that will provide clarity as to whether the policy will respond to this event.”