Johannesburg - Computer assembler Mustek’s growth over the next three to five years will be derived from sales of security solutions and networking equipment and devices manufactured by China’s Huawei Enterprises, according to financial director Neels Coetzee.
Huawei is growing in stature in its competition with US-based global giant Cisco, which has historically dominated sales of communications networking equipment.
Coetzee said that although Mustek’s sales of Huawei products were growing from a “zero base”, it was an “exciting product” and Mustek had access to the entire portfolio of equipment offered by Huawei. These products included smartphones and tablet computers.
Shenzhen-based Huawei overtook Ericsson last year to become the largest manufacturer of telecommunications equipment.
“We are very well positioned. We’ve made the first little breakthroughs into corporate and government,” Coetzee said yesterday.
But the partnership required investment from Mustek to train equipment support staff. This expenditure and the costs related to skills training for its security solutions offering resulted in an increase in operational expenses for the year to June to R371.4 million from R333.5m last year.
Mustek recorded small wins in securing contracts for its security hardware offerings, which include CCTV. The company would now target large firms and the government.
The current pipeline would result in a substantial contribution to revenue in future, Coetzee said, although he declined to disclose the value of projects in the pipeline.
The company had recently launched a cloud computing offering allowing customers to purchase Microsoft products in the cloud, he said. This enabled Mustek to charge ongoing annuity fees to provide the software rather than charging a one-off licence fee.
Mustek reported a 16.3 percent jump in revenue to R4 billion for the 12 months to June, although the gross profit margin declined to 13.6 percent from 14.3 percent.
The addition of the Lenovo and Acer brands to its product range during the year boosted Mustek’s revenue but hurt margins because these products were typically sold at lower mark-ups, Mustek said.
The depreciation of the rand to R9.96 to the dollar by June 30 from R8.19 at the same time a year earlier represented a 21.6 percent devaluation.
Mustek, a net importer, incurred foreign exchange (forex) losses but contained these to R50.5m by changing its policy to cover two-thirds of its dollar exposure. Forex losses last year amounted to R47.8m.
As a result, headline earnings from continued and discontinued operations were 3.9 percent higher at 72.85c a share and basic earnings a share were 6.5 percent higher at 78.43c.
Cash generated from operating activities was R145.5m as inventory and receivables increased at a significantly lower rate than accounts payable. Cash generated as a result of improved working capital management will help to reduce short-term borrowings. Short-term borrowing increased to R1.09bn from R943.8m during the year under review.
Cash and cash equivalents at year-end totalled R466.6m.
The dividend increased by 3c from last year to 20c.
Mustek shares closed unchanged at R5.20 yesterday. - Business Report