Mustek Limited (M1B.F) Earnings Call Transcript & Summary

Good morning, everybody. Thanks for joining us on our results presentation for the financial year ended 30 June 2025. My name is Hein Engelbrecht. I'm the Group Chief Executive Officer of Mustek. And with me, Shabana Aboo Baker Ebrahim, the Group Financial Director of Mustek. The way we want to maybe just proceed today is I'll give you a bit of a group overview because I'm sure there's some new shareholders or people that might not know the group. After that, maybe just some highlights or lowlights of the results for the year ended. Then I'll hand it over to Shabana, where she's going to drill down in a lot more detail as regarding to the financial performance for the last financial year. I will then take over again and maybe just recap on some of our strategic objectives and how we see the way going forward, give you our view of the industry and the outlook for the next couple of years and things that we've seen and where we want to position ourselves. And then -- and I think one question that might come up is before we go into questions-and-answer session, just to give you some feedback on the Novus transaction, where we are and what's likely to happen in the foreseeable future. And then we'll open it up for Q&A. Our e-mail addresses will be at the end of the presentation. So if we can't answer some of your questions immediately or there's questions that maybe you want to just ask us confidentially or in private, please just pop us a mail in the next day or 2, 3. Hopefully, we'll be able to get back to you. So with that, I just want to go and carry on. And if we could just go -- if you look at just from an overview and who we are, maybe just some feedback or some retraction on where we were. Started in 1987, as at that stage, mainly a component distributor importing from overseas. I mean, sanctions was obviously applicable at those days, so quite difficult to get hold of the latest technology, and that's when Mustek effectively started in 1987. In '19 -- roughly 1990, the decision was taken to establish our own brand, which is the Mecer brand, putting all the components together and sell it as a complete PC in the local environment. And we were very successful at that stage from a market share perspective. Number one, selling PC and keeping in mind those days was mainly desktops that were sold for a good couple of years until the big boys arrived in late '19 -- middle to late 1990s. And at that stage, we had a look at this and maybe we need to reinvent ourselves. And we became a general or a mass distributor of IT products, not only our own assembled Mecer PCs. Middle 1990s, feeling that maybe we're losing an opportunity as we moved up the value chain that there's a gap that we're leaving in the market from a component distribution side. We established Rectron, and that was their main focus then was to focus then on the component distribution. But over the years, we've involved, specifically the last couple of years, and I think part of the reason is there's a couple of opportunities that presented itself. And we felt that from a sustainability point of view and looking at our mission where we say it's centered around anticipating material stakeholder needs for long-term sustainability. So we started investing in some other areas of the business with the whole idea over, say, the next 3 to 5 years that, call it, nondistribution businesses within the organization will contribute quite a handsome portion to our net profit after tax. So if we look at from a group point of view, and we're trying to split it just to give you some sort of idea that it's not only distribution that we're relying on. We've diversified over the last couple of years. But if you look at it from a distribution point of view, you've got Mustek and Rectron. And the question is often asked why both. And I think at this stage, still, if you look at it from a product point of view, there's differentiation between them. As I said, a lot more component type of equipment in Rectron's business than in Mustek's business. Mustek more the complete units. And there are certain other areas there where that Rectron is actually focusing on like gaming, recently, the drones, which is doing very well for them. So that's where they're focusing and then Mustek obviously still being a mass distributor of various brands, which if you want to know all the brands, you can get it from our website. Then a second leg is the training leg of the group. And there, we've got a company that we've established a couple of years ago called Mercer Inter-Ed, 100% held by Mustek. And that's ICT training and quite exciting for us, and we're quite excited about the future of training. I think if you look at all reports and comments in the press, not only recently, but the last couple of years is that SA specifically, not SA, but worldwide, there is quite a substantial skill shortage, specifically in the ICT space. If you look at the segmental analysis, which I think Shabana will go through in a bit more detail at a later stage, MIE had an exceptional year, specifically the last quarter where there was quite a bit of spend by Microsoft specifically, which they benefited from. July, August, not as busy, but I mean, the forecast is still very, very positive for the year for the next couple of months through to June 2026. Then on the manufacturing side, we've invested a couple of years ago and in 2 companies specifically, the CPS, which is a smaller one of them. They manufacture server racks and cases, not as big as we'd like them to be, but we've got a plan with management over the next 2 to 3 years to hopefully grow that substantially, positioning it for possibly a disposal in, say, 3 years' time or so. And then YOA, that's an investment we made in the factory sitting in Dubai Airport or the commercial zone in Dubai Airport. They manufacture fiber-optic cables. If you look at the results for the year, first 6 months through to December, not that busy. But since January, they've been extremely busy. I mean, fortunately, 2 years ago, we clocked up a lot of criticism for doubling our capacity there and investing more money into that operation while the market was still slow. But I think we're getting the benefits of that now, looking at the production that they're doing now and the volumes they're pushing through. A lot of their big customers either have got additional rollouts that they are doing. And quite interesting, it's a lot of it's focused on townships and it's aerial solutions. And I think we're well positioned with a great product to supply them with that. And then some of the bigger boys are also now at a stage where they need to replace the infrastructure that they put in about 10, 15 years ago. And there's some big drives. I mean I think a lot of people would have noticed the massive group and the announcements that they've made on their capital expenditure that they're going to embark on in the next 18 to 24 months. And although we're not only supplier to them, we're getting a fair slice of their business and hopefully, like will that continue. Then on the services side, I think we're looking at the services side, specifically from a margin point of view as well and trying to grow the business because as much as the distribution side, it seems like the margins are stabilizing a bit and the margin pressure down is not as severe as maybe 2, 3 years ago. We need to have a look at from a group point of view to expand our margins within the business. Quite exciting investment we've made is CyberAntix, and maybe just a bit of a background on what they do. It's SOC as a Service. So it's a security operating system as a service. So in layman's terms, what they basically do is obviously with agreement with the customer, they will monitor 24/7 your IT environment. Should they pick up there's anything untoward or potentially a cyberattack, alert will be made. They're not doing remedial work. But within the SLA, there will be certain levels of reporting that they will then obviously communicate with the IT manager or whoever is responsible for cybersecurity in the environment that they're looking after. Things changed quite a bit in their lives when we took over control in, I think it was October, November last year. And then suddenly, the floodgates open, people are signing up left, right and center. And we are extremely positive about the future of that business and then where it can actually take us and obviously, within the Mustek Group as well. Khauleza is, call it the man in the van, for lack of a better word, the on-site desktop maintenance service and support, had the SAPS contract, lost it, unfortunately, a couple of years ago, won a decent contract in Western Cape, Department of Education, which is doing fairly well, bringing them to at least a breakeven and slight profitable situation where historically -- well, the last 3 or 4 years, maybe 4 years, they were actually incurring losses. And there's some other opportunities we're working on. Hopefully, we can get some good news from that side as well. And then the last one that it's a start-up, but also very exciting for us. We're hoping to launch the business in November this year. Still a bit of groundwork to do. We are supplying the funding capital or the seed capital for that organization. And what Business AI is doing is a marketplace for AI solutions. So what that means is they created the marketplace or we're busy establishing the marketplace. And then customers can subscribe to the marketplace, and there's a lot of suppliers are from various levels, whether it's developers, hyperscalers, hardware suppliers, anything -- and everything that's got to do with AI after vetting, they will be able to present their services and support on the marketplace and then transact obviously through the marketplace, there's a subscription model where you got to pay x amount to be a member on a monthly basis. And then there's also a revenue sharing model. I think that's quite exciting. We've seen in the market through feedback that we've got from various initiatives that a lot of people are saying like we hear about this AI, but where do I start and where do I go? And I think this is a great opportunity where people can come together and say, listen, I've got a specific need and then see what comes out of the marketplace to actually address that need for you as an organization. Just some of the salient features before we -- and Shabana will give you the details on maybe the whys, the revenue down 15% on last year, EBITDA down 29%. A lot of it's got to do, obviously, with the revenue and lost GPs there. But I think where some of the positives started coming through, headline earnings per share up 7%, not where we want it to be, but at least we're moving in the right direction. The NAV is the NAV. And then the big one that we're quite happy about is the cash generated from operations. The people that attended this presentation last year would remember that we said that this the main focus for this year will be the balance sheet and the cash generation from the operations. We did indicate as well that for us to generate cash, maybe smaller will be better. And I think we started seeing some of those benefits coming through. Through to 2024, a lot of the contribution from the cash came from Rectron, but I think this year, the Mustek team did exceptionally well and generated an exceptional amount of cash. Shabana will give you a bit more detail, but it could have looked even better because there was a substantial receivables have received after year-end, which unfortunately, we couldn't recognize during this period. And then from a dividend point of view, in line with our policy as the policy is a minimum of 20% of attributable earnings, not having all the write-offs that we had last year, it allowed us to increase the dividend quite substantially to 87% -- up by 87% to ZAR 0.1375 a share. And if you want to know ZAR 0.1375, the reason is after tax, it will be ZAR 0.11 because we felt it's going to be difficult to pay out ZAR 0.107 a share or ZAR 0.108 a share. So that's how we got to that number. So it might be slightly more than the 20%. But yes, the dividend up 87% to ZAR 0.1375 a share. So what I'll do now is I'll just hand over the clicker and the presentation to Shabana, and then she will obviously go through a lot more detail with all of you guys. But please, as I said, if there's any more questions, make notes and send it through. We've got Dimitri in the control room. He will relay the messages through to us. And then right at the end, we can hopefully take care of that. But we'd like to see if we can't answer as many of the anticipated questions in our presentation. Shabana?

Thank you, Hein, and good morning, everyone. Thank you for joining our results presentation for the year ended 30th June 2025. I'll just touch on -- this is just a 5-year historical overview of the group. And for those that are joining for the first time or haven't really had exposure to the Mustek Group previously, just to explain where we're coming from financial year 2021 or the year ended 30 June 2021. So 30 June FY '21 and FY '22 were years that were -- where Mustek was very fortunate to have benefited significantly from the COVID pandemic and the work-from-home phenomena, and that resulted -- or that resulted in a fantastic performance. And also over those years, it was almost trading in perfect conditions with demand being way exceeding supply and margins were very healthy. And then also interest rates being at one of its lowest and that contributed very positively to overall profitability. Then we moved into the financial year 2023, where on the traditional business or we can call it the IT distribution side of the business, where we already had started seeing declines in the volumes that we've seen over the previous 2 financial years. For Mustek, Mustek was able to benefit from load shedding where load shedding was at its height in the financial year 2023. And with our sustainable energy product offerings, we were able to maximize and benefit from that phenomena or that period that the country experienced with Eskom. FY '24, then we started seeing significant decline in revenue. Big drop in 2024 resulted from the drop that we -- in sustainable energy that we had in 2023 and then market constraints with interest rates starting to increase, disposable income coming under pressure and just the general market feeling under pressure that impacted our financial year 2024. And then 2025, I think the 2025 year was unfolded in the context of there was considerable pressure and complexity in this year. And I'll go through some of the detail with regards to each of the line items on that. But just to set the scene where we came from and where we currently are with regards to profitability. If I just start off with our segment -- or the top line or revenue in the statement of comprehensive income. Yes, we see a 15% drop in revenue from the previous financial year. And there's a couple of reasons for that, which I'd like to unpack. So the first one, I think a part of our drop in revenue was by design. As Hein mentioned, the focus for us this year was to strengthen our balance sheet and cash generations. And we said that we might -- if we are smaller, it might be actually better for us to focus on more profitability or higher margins as opposed to just chasing revenue. And so with that, taking selective approach to pursuing those deals that were within -- were consistent with the group's risk and profitability criteria that did have an impact overall on our revenue. But then also general market constraints, especially within our distribution sector, Mustek and Rectron, facing some headwinds with regards to market conditions, economic conditions and then the public sector. So there was -- we experienced significant bottlenecks within public sector procurement. And I think just year-on-year and specifically with regards to Mustek operations, we've seen a 33% decline in public sector revenue over the current financial year. Then we're also seeing some ongoing slow demand for green energy products or sustainable energy products. So year-on-year, we did see in excess of ZAR 250 million revenue decline just on the sustainable energy. If I just look at the other segments within the group, Mustek Inter-Ed (sic) [ Mercer Inter-Ed ] performed extremely well. They've actually seen about 11% growth in revenue up to about ZAR 95 million year-on-year. And then with CyberAntix, just ZAR 30 million profit -- ZAR 30 million revenue, but that also we see potential growth coming through from a revenue perspective, but then obviously having a much bigger impact with the margins that they operate on overall profitability. And then if I can explain, go through just margins in general. So overall, we had an overall improvement of margins from 12.2% to 13.3%. And that was more to a more favorable product mix where we're focusing more [Technical Difficulty] Can I continue Dimitri? Apologies, everyone. I'll just start off on gross profit margin again. Apologies, we had a technical difficulty. So yes, just moving on to margins. We had an overall improvement of gross profit margin up to 13.3% from 12.2% in last year. And the main reasons for those is that we focused on a more favorable product mix, so focusing on products that are at higher margin as opposed to low-margin products. Because of Mercer Inter-Ed's improvement in their overall operations with generally higher -- much higher margins than your traditional distribution business, that also impacts your overall margin. And then also included, and I think this is quite an important one to highlight is around the green energy or the sustainable energy. So in the current year, over and above the provision that we had at the end of last year for sustainable energy stock, we wrote down sustainable energy stock by an additional ZAR 32 million or ZAR 34 million down to net realizable value. So if I had to strip out those, call it, that once-off write-down, our traditional business gross profit margin had increased up to 14.2%, up from 12% in the prior year. So that's quite a positive increase in overall margins and just shows that, that at least margins are moving in the right direction, and that should then weigh positively for the financial year going forward. Then we look at overall profitability or profit from operations. As Hein mentioned, yes, we are down from a profit from operations or an EBITDA perspective and the EBITDA margin has dropped below pre-COVID, and that's the reason that I've included the pre-COVID years in there just to show the trend. We -- cost containment is one of our biggest focuses at this point in time, just making sure that we're rightsizing the business. And the focus in the current year is to increase operational profits, specifically within the distribution business because that is our biggest infrastructure and cost base and improving efficiencies and ensuring that we're able to improve the EBITDA margin or the operating profit margin from those businesses. I think what's important to also highlight that included in our operating costs for the current year was a ZAR 4.5 million retrenchment cost for a small Section 189 that both Mustek and Rectron had gone through in the beginning of this calendar year. The biggest sort of highlight, if I can call it that, on our statement of comprehensive income is our improvement in net financing costs. Over the past 2 years, finance cost has been a massive focus. We -- as you can see from the graph, we -- from 2021, our finance cost just creeped up and creeped up. And there was 2 reasons for that. One was the interest rates. And then also we were extremely bloated from a working capital perspective and inventory perspective. And again, as we mentioned last year, our focus was to reduce working capital, strengthen our balance sheet, improve cash generated from operations and ultimately reduce our net financing cost, which we're quite comfortable or happy about the fact that we were able to achieve that to a significant extent. Even though there was an interest rate reprieve in the -- starting from the second quarter of the financial year, the biggest impact on our overall financing cost was because of a reduction in borrowings that we were able to do by cash generated from operations and the reduction of our overall working capital. Headline earnings per share, there's been no significant HEPS adjustments in the current year. The difference between the prior year headline earnings per share and the current year headline earnings per share is only 7%, whereas earnings per share is a lot bigger. And the reason for that is that in the prior year, we had quite a big impairment on our investment in Zaloserve, which essentially owned Sizwe IT Africa, which we disposed of in October 2024. And so that was one of the biggest reasons for the headline earnings per share impact in the prior year. As Hein mentioned, dividend per share, maintaining the 20% payout ratio, and we've declared a final dividend of ZAR 0.1375 per share in the current financial year. Net asset value, as I mentioned, the net asset value, tangible net asset value, it is what it is. But I think what's important here is that we are sustaining the balance sheet and our focus is on continuing to strengthen the balance sheet and maintain sustainability and strength in that balance sheet. The biggest 2 line items in our balance sheet is inventory and trade receivables. We are a very working capital-intensive business, specifically in our distribution segment, which is currently the biggest portion of the group. I think there has been a notable improvement in inventory levels by approximately ZAR 600 million, and that has greatly enhanced the group's liquidity and overall financial position. We are still holding just under ZAR 400 million worth of sustainable energy stock, which we expect to clear in approximately over the next 2, 2.5 years, but we do believe that we are sufficiently provided for that stock at this point in time, and these numbers are net of that provision. With the receivables, the days increased due to a push for extended terms. We are seeing more and more debtors requesting longer payment terms or not even requesting, actually pushing for extended payment terms. And then included in the year-end number, as I mentioned, unfortunately, there were 2 big long outstanding debtors that paid a big portion just after year-end, and we're unfortunately unable to record that cash receipts in this financial year. But with those long outstanding debtors, approximately ZAR 170 million was received very close after year-end, which has improved overall liquidity as well. Just looking at the provision for bad debts or ECL provision as we call it in IFRS, we are sufficiently provided. The 2 long outstanding debtors, there wasn't really any provisions or a significant provision against those 2 debtors because they were received so close after year-end that there wasn't any necessity for a provision against those debtors at year-end. And then the other biggest highlight on our financial statements, cash generated from operations. In the words of my broadband this morning on an article, cash generated from operations has skyrocketed, which is actually clearly depicted in this graph that you're seeing on the screen at the moment. So like we mentioned and I've said, the focus on working capital has resulted in a cash release from inventory and receivables, which we utilized to repay our trade facilities or our borrowings. And ultimately, that resulted in an overall decrease in our net financing cost by 33%. So that's my story this morning, and thank you very much. And I'm going to hand over to Hein now to cover some of our strategic priorities and opportunities over the next year. Thank you.

Yes. And I think just before I carry on the strategic priorities, I think also just to mention that we haven't seen the complete effect of the improvement in working capital yet. It was a process over the last couple of 1 year and 1.5 years. And we started seeing more towards the latter part of our financial year. Some of those benefits coming through where we could settle a lot of debt and hopefully, that can continue going forward. So from the strategic priorities that we've set ourselves, and I think it's aligned with some of the comments that was made specifically on the EBITDA level that Shabana went into quite a bit of detail with is going forward, we'd like to preserve and grow the profitability of our core IT distribution business and get the margins back to at least the margins that we achieved pre-COVID, which is an EBITDA margin of about 4%. There might be some room for improvement. But if we can get back there, we're not that far off, but I think that's something that we can have a look at and it's an objective for us to get it back there. And then also look at the expansion of the group services segment, which I've mentioned earlier, whether it's Khauleza, CyberAntix, Business AI, have a look at that and how we can expand that also from a long-term and longer-term point of view. Hopefully, that can become a substantial contributor to the profitability in future. And then we're continuously looking at optimizing our capital allocation across the group. We've seen some substantial improvements. So I think we're in a position now where we can look at some other opportunities with -- as regards to the optimization of the capital allocation. Not being under pressure just to service debt all day every day. So that -- those are some of the priorities we've got. And yes, and I'll touch on the deal. I mean they might be able to assist us quite a bit there because I mean these guys have been around for a good couple of years, and I think they're pretty much experts on that. But I think from our side is to focus on the business and see what we think we can improve on and focus on that and then obviously, hopefully seeing some results going forward. So those are strategic opportunities. And then strategic priorities. And then if you look at from the opportunities that we see in our business and from a product perspective, I think in the support of Windows 10 and the transition to Windows 11 remains a significant driver of demand, particularly in commercial sector. The take-up has been fairly slow, and we think it's probably going to take a bit longer. And we expect quite uptick in demand in 2026. Although we're saying that, and I think Shabana has mentioned that there's some bottlenecks on the public spend, we've seen some request for quite sizable deals coming through. And a lot of it's got to do with preparing themselves for the transition to Windows 11. And obviously, the benefits that come with it, artificial or AI PCs, as we call it, PCs that's ready for AI. We're expecting adoption of that, specifically on the premium customers to pick up as well. And so I think there's some good opportunities still. And keeping in mind a lot of the machines that was bought during COVID, we're getting to a stage now where the replacement cycle starts kicking in and hopefully, that can drive some demand in the foreseeable future for us. On the solar and the backup power volumes, I mean, that's softened compared to the prior years. I think we all know why. But we still believe that there's a long-term relevance for our green energy solutions. From going forward and what we've seen and while we've made some of these investments, ransomware and cyber extortion have grown significantly in the past 5 years. And we don't -- we haven't seen any signs of it slowing down. And I think our investment in CyberAntix should help us to grow quite substantially in that market segment. Artificial intelligence, that's firmly established itself as a top IT investment priority. While generative IT has moved through its initial life cycle, enterprises are now focusing on practical AI use cases with measurable returns. particularly in analytics, automation and cybersecurity space. And we think this is expected to drive increased 2026 IT spend into AI optimized infrastructure, edge devices and supporting the software ecosystem. So for Mustek, I think this represents a significant opportunity. We'd like to believe that we're well positioned to capture growth in the AI-enabled hardware, software and services and also expanding our role as a value-add partner to vendors and resellers in the environment. And we believe that our investment in Business AI opens a trusted marketplace that connects enterprises with suppliers. And beyond the marketplace, Business AI positions itself as a trusted partner that helps organizations move past AI towards measurable outcomes. So yes, so if you look at heading into the new financial year, I think, again, we're cautiously optimistic. The market remains complex, but the opportunities are real and potentially significant. And I think with a sharpened cost base, more focused portfolio and an active pipeline, I think we're ready to execute and continue delivering cluster technology for real-world impact. And yes, so we're actually looking forward to all the opportunities and taking fully benefit of that. And we'd like to believe that will be reflected in our results going forward. So on that, [ Ivan ], would you put us back here? Just on the feedback as regards to the Novus transaction, I think everybody is well familiar that the offer was sent out. There was a lot of questions from one individual specifically. And before the TRP could then issue the certificate of compliance, they obviously had to address the concerns that was raised by the specific individual as regards to the transaction. The TRP, as far as I understand, appointed an investigator or inspector, I'm not sure what they call it, to have a look at the whole transaction. A report was issued. Unfortunately, from our side, we weren't privy to the report because I think that was just a communication between TRP and Novus. Then Novus, I believe it responded to it. And that's basically where we are now. We're waiting for feedback from the TRP after they've responded to all the questions that was raised. Should the TRP be happy, then there's no reason why they shouldn't be able to issue the certificate of compliance. I think the word they're using then they close the offer. And I think at that stage, then Novus will come back in and through either SENS announcements or public statements, whatever, announce to the market on the way forward and the potential timing of the transaction. So having had discussions with -- on to be honest with you this morning, say, listen, what message do I send to my shareholders? They said, you can tell them that, we are excited about the opportunity. We're committed to it and so is our shareholders. And I think that's where we are now. So I think if there's more specific questions on say the questions was asked, please, that will have to be taken up with Novus. We don't have that. We weren't privy to it. The only communication we got from the TRP, they had certain questions as regarding to Mustek's conduct and was relating mainly to the announcements that we've made, which we've answered and the feedback that we got from them is that Mustek is clear, and there was nothing untoward that we did as Mustek shareholders, Mustek management. So I think that's where we are there. So as said, if there's more specific questions, please direct to Novus. But that's the way we understand where we are and then potentially where we're going to go forward. So I think that's the end of our presentation. So...

Can we head over to questions?

Yes, we can do questions and answers now. Dimitri, if you don't mind, maybe just putting them through...

Thanks, Hein. First question from [ Richard Hesson ]. Employees down substantially at year-end, 1,112 versus 1,335 in comparative. What will be the cost savings in '26? And what are the once-off retrenchment costs incurred in '25?

Costs were ZAR 4.5 million. I think if you look at it from a budgeting point of view, we're expecting -- although there will be some increase, we're expecting a flat payroll 30 June '26.

Yes. So the retrenchment happened or was finalized in February. So obviously, we didn't see too much of the savings coming through and then obviously with the once-off retrenchment costs. But from a budgetary perspective, like Hein mentioned, we're expecting almost flat or just maybe a small decline, taking into account increases that we were approved.

Two from Richard. Referencing results made to a ZAR 32 million nonrecurring energy stock write-down. Is this the last of the energy stock write-downs comfortable with hedging?

Yes. I think -- yes, those are additional write-downs that we took over and above the provisions. And I think we're comfortable and so as our auditors with the provisions that we've actually currently got. On the balance sheet, a lot of testing was done subsequent to year-end regarding net [indiscernible] value. Can we sell it at least at the price that is sitting in our book set? And the answer is yes.

Yes, the values that it's currently sitting at, we're quite comfortable.

Do you expect more markdowns going forward?

No. Hopefully not. But currently, no.

Generation much better, but finance costs still high at ZAR 154 million. What can this cost decrease to in 2026?

[indiscernible] To give you some predictions here and forecast, which is difficult, but we haven't seen the full benefit of the reduced working capital yet. So there should still be -- keeping in mind, there's quite a bit of money that came in after year-end as well. There should still be quite a reduction going through to June, all things being equal.

Yes. Like I mentioned, I think we have some improvement still on inventory that we could work on. And hopefully, if all things equal, like I mentioned, we should see still some savings coming through on finance costs over this year.

All right. Fourth from Richard. Balance sheet is in better shape. Do you anticipate starting share buybacks again considering trading at around ZAR 0.5 NAV?

At this stage, I think from a working capital point of view, the main focus is to reduce the short-term debt and the most expensive debt. But that's something that we'll assess on an annual basis. But currently, we're not embarking on additional share buybacks. And unless if something changes in the future, which we'll communicate, the answer is no. I think the focus is still reducing expensive short-term debt.

Five from Richard. Post year-end collected ZAR 170 million from overdue receivables. What were the aging of these? And what provisions have been made against these that could reverse in 2026?

I think I covered that. So they were in excess of 120 days. Like I mentioned, there wasn't any big provisions against these debtors because they were received so close to -- after year-end, we didn't feel the need to provide for them at year-end.

[indiscernible] To what extent on Novus' management assisting in balance sheet optimization initiatives, return on capital targeting and capital allocation decisions?

At this stage, not yet.

Question from [ Alexander Days ]. Is the noncore Kenya property expected to be sold at the carrying value? Or is the market value higher? I understood the value of property was in the region of $1 million to $2 million.

Yes, that's correct. So the current fair value of the property is higher than what its carrying value is. It is being marketed at fair value, and we hope that we can get something -- we can get a price that is very close to market value.

Can we expect [Technical Difficulty] finance costs? And is the run rate from the previous interim results a good indication of what can be expected next year?

I think the answer is yes. All things being equal, I think it's a good indication.

Yes. Look...

With opportunity for further improvement still.

Yes, there is opportunity for further improvement. We've seen a massive decline with the change in inventory over the current year. And we might not get to the 30% decline in finance costs, but I think definitely positive improvement.

Can you disclose the revenue and gross profit contribution from renewable energy? What is the level of excess stock there?

So I think as I mentioned, we -- our sustainable energy resulted in a negative gross profit in the current year with the once-off write-downs that we had put through. And we're currently sitting with just under ZAR 400 million worth of sustainable energy stock. It's not like it's not moving, but it's going to take some time to clear.

Also from Alexander, can you provide guidance on capital allocation?

We've got no big capital projects planned for the next financial year. If there's going to be capital allocated, it will just mainly be replacement of, say, IT infrastructure and the like. So -- and then the only -- other one that maybe is the investment in Business AI, which we've committed ZAR 7 million to.

From Alexander, your outlook statement suggests that the business may be ready to return to revenue growth. If so, how do you plan to achieve this while still delivering the working capital improvements you have guided?

I think we've put in a lot of checks and balances. Are we going to achieve it? Hopefully, the market is actually going to start growing again. We've got our own -- obviously, own initiatives. But I think there's a lot of controls to be put in place. I think the management has presented about the fact that we need to further improve and then at least maintain at the current levels. We can't just get back to the game. I mean it's -- we got us into a position where it became quite difficult. And I think we're gradually getting out of that and let's not go back there.

A question from [indiscernible]. Can you talk a bit more about Business AI? How much did Mustek invest in it? And what it will look like?

Well, ZAR 7 million is the number. Business AI, if I can, and I can read you the write up that they've given me. It's a marketplace. So what they're doing is like they're positioning themselves as a trusted partner that will help organizations to move past the AI hype towards measurable outcomes. You can actually go and visit their website. I think it's up and running. Yes?

Yes.

Yes. So you can go visit their website, but I mean -- something quite exciting. So they're basically a platform or marketplace where people come together, and they've got obviously the infrastructure they're going to put in place to enable people to transact.

Next question from Alexander Days again. What is your outlook on debtors days and bad debts?

Debtors days definitely going to improve, especially now that some of these long outstanding debtors are starting to clear out. So our target is 55 days debtors overall for the group, which we continue focusing and maintaining on. We're quite comfortable with our provision on bad debt and don't expect any further write-downs to hit the income statement over and above the maintenance of that provision as in line with what our debtor values are -- our debtor balances are.

A question from [Technical Difficulty] Steve.

At this stage, it's muted, but there's some substantial quotes that's gone out. It is, but it's not to the expectation that we had. But like I said, there are some substantial initiatives that we are currently working on, and we're actually delivering on one. But unfortunately, I can't disclose the detail.

Question from [indiscernible]. Is the Department of Labor's new sector quotas a risk for Mustek?

Well, firstly, we had a look at it the other day. I mean it might actually be an opportunity, to be honest with you. But I think it's still got a -- it's still a process we're going to go through. I think there is a legal case that the DA, I think I'm not mistaken, brought against government. I don't know if it's been enacted, but what we are working towards, should it be -- that I think 1st of April.

Yes. It's already been enacted from 1st of April.

Yes. And I think we're going to get ourselves ready. I think some of the definitions, we're still going to go drill down there where it's -- the designated group has been expanded to a large extent, I think that might actually, to a certain extent, at some levels, not all levels across the board, be beneficial to Mustek.

And our final question from Alexander Days. What is your medium-term target for return on equity?

10%.

It depends how you define medium term.

We're working towards 20% to 30%. So that's medium term, then we'd like to get back there.

I take that being the last question. If anybody else may, give it a moment, has a question.

Is that it?

I think we've just gave them all of...

In that case, thank you very much for joining us. I really much appreciate it. Just -- okay. Maybe you can just -- Ivan, can you just maybe put up our e-mail address there? It's [email protected] and [email protected]. We will gladly get back to you in the next day or 2, 3, depending on the difficulty of the questions, obviously. But yes, thank you very much for joining us. Your time and attendance is really much appreciated. Have a lovely day.

Thank you very much.