Mustek investments in new product lines should pay off

JSE-LISTED Mustek is banking on its investments in new product lines to propel it to greater heights in the near future and contribute significantly to revenue and profits.

The group said on Friday that its investments in new product lines – such as networking equipment, sustainable energy and fibre – are starting to contribute meaningfully to both revenue and profit.

“The growth in fibre to the home is not only assisting our fibre sales, but also increasing the demand for new devices to fully benefit from the faster internet speeds. The group will continue to look for opportunities to add additional products to its product offering in order to better utilise its infrastructure. The contributions from products such as Huawei are expected to continue growing and although the gross profit margin might be lower for these products, net profit should increase,” the group said.

Mustek is one of the largest assemblers and distributors of personal computers and complementary ICT products in South Africa.

On Friday the group reported a 21.58 percent increase in profits to R55.89 million for the six months to end December, up from R45.97m, while revenue increased by 2.1 percent to R2.70 billion, up from R2.65bn compared to last year, mainly as a result of growth in new products and services added to the group’s portfolio.

Its headline earnings per share increased by 19.6 percent to 69.49 cents a share, up from 58.08c, and basic earnings per share rose by 36.9 percent to 78.24c, up from 57.13c compared to last year.

The group said the gross profit percentage increased to 15.2 percent as compared to last year’s 13.2 percent, and this reflected the recovery of forex losses incurred in the prior year due to the rand’s depreciation.

“The rand/dollar exchange rate was extremely volatile during the period under review and the group’s hedging policy proved effective as forex losses was limited to R11.3m compared to R3.9m in 2017,” the group said.

Its share price responded positively to the results on Friday as it surged by more than 7 percent on the JSE to close at R8.74 a share, up from Thursday’s closing price of R8.10.

Going forward the group expects the smart education and learning market to grow as more education institutions realise the importance of digitisation in the mobile and connected world.