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JSE-listed technology distributor Mustek has slashed its dividend by 90% to 7.5c/share after it reported an 82% slump in headline earnings per share.
Revenue for the year ended 30 June 2024 declined by 16% compared to R8.5-billion from R10.3-billion a year ago as sales of renewable energy solutions tanked following the suspension of load shedding by state-owned electricity utility Eskom from March.
“Prevailing uncertainty froze corporate and government spending, and the unexpected abatement of load shedding abruptly ended the renewable energy boom, which fuelled our growth last year,” Mustek said in commentary alongside its annual results.
“Reduced demand for green energy products put us in a challenging situation with surplus stock in a tough macroeconomic environment with high interest rates,” it said.
Sales of green energy products declined by R1.35-billion year on year. Gross profit on green energy products reduced by R338-million. Margins on these products reduced from an average of 22% to 14%, while margins on the rest of the business remained stable.
Mustek said the operating environment was characterised by caution leading up to the 29 May general election.
The traditional ICT distribution part of the business was “relatively stable”, it said.
Margins
“The group’s two largest businesses, Mustek Operations and Rectron, saw their revenue decline by 12% and 24%, respectively. Our IT training company, Mecer Inter-Ed, experienced a decline in revenue to R85-million (FY 2023: R98-million) in unfavourable market conditions.”
The gross margin declined to 12.2% from 13.9% previously due to “competitive forces in the market for green energy products, product composition and efforts to lower stock levels”.
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Mustek said that consolidation and streamlining the management of critical functions to strengthen its financial position is a strategic priority for management in the 2025 financial year.
“This will include disposing of non-performing assets and consideration of complementary acquisitions that align with our core competencies and pursuit of diverse revenue streams,” it said.
Already, it has announced a plan to sell Zaloserve (trading as Sizwe IT Africa) for R15-million. It didn’t say who was purchasing the business.
Mustek has also acquired a 70% equity stake in a cybersecurity specialist, CyberAntix, for R8-million. CyberAntix provides a security operations centre-as-a-service solution.
“We foresee a more stable period ahead and are aiming for a substantial improvement in cash flow, further reduction in working capital and a stronger balance sheet,” Mustek said. – © 2024 NewsCentral Media
