Mustek bloodbath

Mustek has released its unaudited consolidated financial results for the six months ended 31 December 2024, revealing a marked decline in revenue and net profit.

Its revenue declined 14% year over year, from R4.3 billion as of 31 December 2023 to R3.7 billion as of 31 December 2024.

The company blamed its poor performance on economic constraints, lower consumer demand, and its selectiveness in pursuing deals.

“For the six months ended 31 December 2024, the Group’s performance remained under pressure, reflecting the ongoing challenges posed by global and local economic conditions,” it said.

It said the difficult economic conditions included persistent inflation, elevated interest rates, sluggish economic growth, and fluctuating consumer and investor confidence.

“The Group’s two largest segments, Mustek and Rectron, saw their revenue decline by 9.1% and 26.0%, respectively,” it said.

“The Group’s IT training company, Mecer Inter-Ed, experienced a slight decline in revenue to R43.4 million from R46.2 million from tougher market conditions, although the margin achieved was better than the comparative period.”

At the same time, the company’s net profit of R12.86 million during the period was down roughly 75% from R52.37 million in the same period last year.

However, it noted that its gross profit margin increased from 13.4% in December 2023 to 13.8% as of 31 December 2024.

Mustek’s earnings per share declined 75% from 91.02 cents to 23.01 cents year over year, while headline earnings per share dropped 74% to 23.47 cents from 91.34 cents.

Mustek has been suffering financially with the extended suspension of load-shedding in South Africa and the end of the work-from-home boom that occurred with the Covid-19 pandemic.

This resulted in demand for backup power products plummeting, but the company still has a surplus of stock. It can still sell the stock, albeit at lower margins.

Despite this, analysts believe Mustek could offer a great investment opportunity.

In September 2024, Protea Capital Management CEO Jean Pierre Verster explained that Mustek is a small-cap stock that will strengthen as the local market becomes more positive.

Its low value makes it an acquisition target, which many companies may find attractive as an opportunity to buy the company at a bargain price.

Mustek is currently under a takeover offer by Novus after the latter exceeded the mandatory buyout threshold of 35% of the company’s shares earlier this year.

The Competition Commission has recommended the Competition Tribunal approve Novus’ purchase of JSE-listed Mustek for R335 million. 

At the same time, the Takeover Regulation Panel (TRP) has ruled that the DK Trust, a shareholder in Mustek that counts Group CEO Hein Engelbrecht, among its trustees, is acting in concert with Novus.

The DK Trust, alongside Mustek’s managing director Neels Coetzee and Engelbrecht, previously told Novus that it would reject its buyout offer.

Novus explained last year that shareholders who elect to sell can choose between receiving cash, shares, or a combination of cash and shares.

Novus has offered a price of R13 per Mustek share. Mustek was trading at R14.51 at publication time.

Alternatively, shareholders can elect to sell for R7 plus one Novus share, or trade one Mustek share for two Novus shares. Novus was trading at R6.80.

The table below provides a summary of Mustek’s financial results for the six months ended 31 December 2024.