Mustek has released its financial results for the year ended 30 June 2024, revealing significant declines in revenue and profit.
The group recorded revenue of R8.5 billion in the 2023/24 financial year, down 16% from R10.1 billion in the previous reporting period.
Mustek Group’s operating profit declined by 39% to R278.5 million in 2023/24 from R454.8 million in 2022/23.
As a result, the company posted profit after tax of R21.4 million in the last financial year, down 90% from R219.6 million in 2022/23.
The group posted a trading statement on 10 September 2024, warning that it expected significant earnings losses compared to the previous year.
However, Mustek revised its earnings expectations in an updated trading statement released alongside its financial results, saying headline earnings would be somewhat lower than previously believed.
In its financial results for the year ended 30 June 2024, Mustek reported headline earnings per share of 67.13 cents. At the same time, it reported basic earnings per share of 37.31 cents.
The group said the abrupt and extended suspension of load-shedding hurt its performance in 2024. Mustek’s backup power products are some of its most popular offerings.
Following a renewable energy boom over recent years, demand for such products has dwindled in 2024 due to Eskom’s consistent load-shedding suspension since 26 March.
“The operating environment for the year ended 30 June 2024 was marked by tough economic conditions and cautious market sentiment leading up to the general elections in South Africa,” said Mustek.
“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.”
As a result, it was left with surplus stock in a hostile macroeconomic environment with high interest rates, which presented a challenging situation for the ICT distributor.
Despite the poor performance in 2023/24, many analysts believe Mustek offers a great investment opportunity.
Protea Capital Management CEO Jean Pierre Verster explained Mustek is a small-cap stock that will strengthen as the local market becomes more positive.
The company’s low value makes it an attractive acquisition target, and many companies may see it as an opportunity to buy the distributor at a bargain price.
Umthombo Wealth chief investment officer Alex Duys explained that although Mustek is suffering because it overstocked power backup products, there is still some demand for these products.
Duys said Mustek is still selling these products at lower margins.
Mustek is optimistic that it can address the working capital issue, which will free up a lot of cash.
The higher cash flow will reduce the company’s debt and interest payments, resulting in increased earnings. This is expected in a year or two.