KAP: KAP INDUSTRIAL HOLDINGS LIMITED - Unaudited Results For The Six Months Ended 31 December 2016 |
KAP: KAP INDUSTRIAL HOLDINGS LIMITED - Unaudited Results For The Six Months Ended 31 December 2016 Unaudited Results For The Six Months Ended 31 December 2016 KAP Industrial Holdings Limited Registration number: 1978/000181/06 Share code: KAP ISIN: ZAE000171963 (`KAP´ or `the company´ or `the group´) UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016 HIGHLIGHTS Revenue up by 10% to R9bn Operating profit up by 24% to R1.1bn Headline earnings per share up by 18% Cash generated from operations up by 27% Net asset value up by 17% OPERATIONAL REVIEW The group continued to grow through investment in strategically aligned businesses and operations with high barriers to entry, which enhance the group´s quality of earnings in respect of sustainability, solid margins and strong cash conversion. The disciplined execution of the group´s strategy produced pleasing operational results for the period. Diversified logistics - 48% of revenue Diversified industrial - 52% of revenue Revenue breakdown by division: Contractual logistics - 36% Specialised contractual supply chain and logistics services Passenger transport - 12% Personnel, commuter, intercity and tourism transport Integrated timber - 16% Forestry and timber manufacturing operations with primary and secondary processing Chemical - 17% Manufacture of PET, UF resin and impregnated paper Automotive components - 11% Manufacture of components used in new vehicle assembly and after-market vehicle accessories Integrated bedding - 8% Manufacture of foam, fabrics, springs, bases and mattresses Revenue for the diversified logistics segment increased by 9% to R4 473 million while the operating profit of the segment increased by 2% to R488 million. The contractual logistics division performed well for the period in spite of subdued industrial activity and drought conditions in southern Africa. This weighed on revenue and operating margin as a result of lower volumes in the infrastructure and mining, agriculture and petrochemical sectors. Activity in the food and specialised warehousing sectors remained stable. Strong cost control and efficiency improvements continued to support the overall operating margins and the competitiveness of the division. The passenger transport division performed well, with increased activity and contract growth in the commuter, personnel and tourism transport sectors and continued growth in its Mozambique operations. Slower activity in the intercity travel environment impacted on both revenue and operating margin of the division´s operations in this sector. Revenue for the diversified industrial segment increased by 12% to R4 637 million while the operating profit of the segment increased by 49% to R624 million. The integrated timber division performed well for the period with revenue growth and margin improvement resulting from its recent investments, including an expansion to its MDF (medium-density fibreboard) plant, continued focus on its value-add strategy and further improvement in its forestry, sawmilling and pole operations. The chemical division also performed well with revenue growth and margin improvement resulting mainly from a value-add paper impregnation plant installed at its Woodchem operation, while its Hosaf operation continued to benefit from sustained demand for PET. The automotive components division performed well for the period due to stable vehicle assembly volumes supported by robust export volumes and successful new model introductions in the domestic market. Technology investments, continuous improvement projects and the streamlining of Autovest operations supported operating margin. The integrated bedding division continued to drive integration synergies and the roll-out of their decentralised model for mattress assembly and distribution, which provided strong operating margin improvement from a stable revenue base. FINANCIAL REVIEW These are the unaudited results for the six months ended 31 December 2016. Revenue and operating profit before capital items Revenue increased by 10% to R9 033 million (H1:16 R8 189 million). Operating profit before capital items increased by 24% to R1 112 million (H1:16 R898 million). Operating margin increased to 12.3% (H1:16 11.0%) as a result of divisional integration benefits, continued operational streamlining and recent capital investments. Headline earnings per share (HEPS) HEPS increased by 18% to 25.2 cents (H1:16 21.4 cents). Tax rate The effective tax rate increased to 29.2% (H1:16 28.4%) mainly as a result of withholding taxes emanating from the implementation of the group´s policy to routinely repatriate surplus funds from non-South African territories. Cash flow Cash generated from operations increased by 27% to R495 million (H1:16 R391 million), supported by earnings growth and improved working capital management. The cash flow cycle remains unchanged with a seasonal investment in working capital for the period to 31 December each year. In line with historic performance this working capital investment is expected to normalise by 30 June. Working capital Net working capital decreased by R180 million to R1 125 million despite the impact of the various acquisitions concluded. Inventories increased by R98 million and accounts receivable increased by R334 million, while accounts payable increased by R612 million. Capital expenditure Replacement capital expenditure continues to be managed in relation to the annual depreciation charge and amounted to R640 million for the period. Expansion capital expenditure of R581 million resulted from continued investment in the group´s asset base to drive growth and efficiency benefits. Capital expenditure was mainly directed towards continued progress on an upgrade of the PG Bison Piet Retief particleboard plant; expansion of the Hosaf PET plant; construction of a new integrated bedding facility; and logistics and passenger transport vehicles. Capital structure In order to facilitate the various expansion activities of the group while maintaining a healthy capital structure to facilitate future growth for KAP, the following funding activities were concluded during the period: - R1 500 million equity raised through a fully subscribed rights issue; - R1 374 million raised through a combination of private and public bond issuances with 3 and 5 year tenures, with a mix of fixed and floating interest rates; and - R2 800 million new facilities secured as a combination of term debt and revolving credit facilities with 3 and 5 year tenures, with a mix of fixed and floating interest rates. Net interest-bearing debt decreased by R584 million to R2 617 million and the gearing ratio improved to 25% (H1:16 40%). The debt structure and cover ratios are reflected as follows: 31 Dec 2016 31 Dec 2015 Debt structure and cover ratios Rm Rm Interest-bearing long-term liabilities 6 449 2 920 Interest-bearing short-term liabilities 527 1 059 Bank overdrafts and short-term facilities 164 276 Cash and cash equivalents* (4 523) (1 054) Net interest-bearing debt 2 617 3 201 Total equity (excluding non-controlling interests) 10 294 8 037 Net interest-bearing debt: equity 25% 40% EBITDA 1 552 1 323 Net finance charges 198 151 EBITDA: interest cover (times)** 8.4 9.4 Net debt: EBITDA (times)** 0.9 1.2 * Cash and cash equivalents were increased in order to facilitate the payment of R4 100 million for Safripol on 3 January 2017 ** Rolling 12 months Debt maturity profile The net interest-bearing debt maturity profile of the company improved during the period as a result of the replacement of existing facilities with longer dated facilities. Net asset value (NAV) The NAV per share increased by 17% to 387 cents from 330 cents. ACQUISITIONS The group concluded the following transactions during the period in accordance with its strategy: Safripol Holdings (Pty) Ltd (Safripol) The group acquired 100% of the equity and claims in Safripol for R4 100 million, effective 1 January 2017. Safripol is engaged in the manufacture of polypropylene and high density polyethylene, which are used in the manufacture of a broad range of plastic injection and blow moulded products. This business operates with a similar business model to that of Hosaf and manufactures products which are complementary to those manufactured by Hosaf. Lucerne Transport (Pty) Ltd (Lucerne) The group acquired 100% of the equity and claims in Lucerne effective 1 September 2016. Lucerne´s operations are complementary to those of Unitrans, specifically in terms of bulk liquid tanker transport of chemicals and edible oils. Xinergistix (Pty) Ltd (Xinergistix) The group acquired a controlling interest in Xinergistix effective 1 July 2016. Xinergistix operates in the logistics sector, providing complementary services to those of Unitrans. OUTLOOK Management continues to focus on optimising and expanding its existing operations and on growing its market share in all areas of operation and remains optimistic that these activities will provide a solid platform for continued growth, despite the current challenging economic environment. The acquisition and integration of Lucerne and the increased shareholding in Xinergistix have produced new opportunities for the diversified logistics segment and will facilitate increased intragroup trade within KAP. Improved efficiencies and reduced costs resulting from the recent rationalisation of the contractual logistics division continue to support the competitiveness of the division in terms of contract renewals, extensions and the procurement of additional contracts. The contractual nature of both the contractual logistics and passenger transport divisions continues to provide underlying support through the current economic cycle. In the diversified industrial segment, the current momentum of existing operations is expected to continue in the second half of the financial year. Certain key projects, including an expansion of the Hosaf PET operation, an upgrade of the PG Bison Piet Retief particleboard plant and the construction of a new integrated bedding facility, are progressing on schedule and will support revenue and operating profit growth in FY2018. The acquisition of Safripol is expected to bring scale benefits to the chemical division as it is exposed to exciting new markets. INTERIM DIVIDEND In line with the group´s policy, the board has not declared an interim dividend. APPRECIATION The board of directors records its appreciation for the continued support and loyalty of the group´s employees, shareholders, customers and suppliers. On behalf of the board J de V du Toit KJ Grové GN Chaplin Independent non-executive chairman Non-executive deputy chairman Chief executive officer 13 February 2017 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed consolidated income statement Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited % Audited Notes Rm Rm change Rm Revenue 9 033 8 189 10 16 232 Operating profit before depreciation, amortisation and capital items 1 552 1 323 17 2 790 Depreciation and amortisation (440) (425) (806) Operating profit before capital items 1 112 898 24 1 984 Capital items 1 4 (8) (20) Earnings before interest, dividend income, associate and joint-venture earnings and taxation 1 116 890 25 1 964 Net finance charges (198) (151) (313) Share of profit of associate and joint-venture companies 10 10 24 Profit before taxation 928 749 24 1 675 Taxation (271) (213) (482) Profit for the period 657 536 23 1 193 Attributable to: Owners of the parent 629 513 23 1 147 Non-controlling interests 28 23 46 Profit for the period 657 536 23 1 193 Headline earnings per ordinary share (cents) 25.2 21.4 18 47.8 Fully diluted headline earnings per ordinary share (cents) 25.0 21.1 18 47.2 Basic earnings per ordinary share (cents) 25.3 21.2 19 47.1 Fully diluted earnings per ordinary share (cents) 25.1 20.8 21 46.5 Number of ordinary shares in issue (m) 2 662 2 441 9 2 441 Weighted average number of ordinary shares in issue (m) 2 487 2 424 3 2 433 Earnings attributable to ordinary shareholders (Rm) 629 513 23 1 147 Headline earnings attributable to ordinary shareholders (Rm) 2 626 519 21 1 163 Additional information Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm Note 1: Capital items Loss on disposal of property, plant and equipment and investment property - (5) (8) Gain on bargain purchase 4 - - Loss on disposal of investments and impairments - (3) (12) 4 (8) (20) Note 2: Headline earnings attributable to ordinary shareholders Earnings attributable to owners of the parent 629 513 1 147 Adjusted for: Capital items (note 1) (4) 8 20 Taxation effects of capital items - (2) (3) Non-controlling interests´ portion of capital items (net of taxation) 1 - - Capital items of associate and joint-venture companies (net of taxation) - - (1) 626 519 1 163 Condensed consolidated statement of changes in equity Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm Balance at beginning of the period 8 862 7 930 7 930 Changes in ordinary stated share capital Net shares issued 1 456 - - Changes in reserves Total comprehensive income for the period attributable to owners of the parent 575 606 1 198 Dividends and capital distributions paid (439) (363) (363) Share-based payments 35 33 71 Changes in non-controlling interests Total comprehensive income for the period attributable to non-controlling interests 27 25 48 Dividends and capital distributions paid (12) (13) (22) Acquired on acquisition of subsidiaries 2 - - Arising on acquisition of subsidiaries 102 - - Balance at end of the period 10 608 8 218 8 862 Comprising: Ordinary stated share capital 8 774 7 318 7 318 Reverse acquisition reserve (3 952) (3 952) (3 952) Distributable reserves 5 208 4 362 5 018 Share-based payment reserve 234 161 199 Other reserves 30 148 84 Non-controlling interests 314 181 195 10 608 8 218 8 862 Condensed consolidated statement of financial position 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm ASSETS Non-current assets Goodwill and intangible assets 2 204 1 603 2 078 Property, plant and equipment and investment properties 9 404 7 600 8 128 Consumable biological assets 1 971 1 844 1 890 Investments in associate and joint-venture companies 74 152 124 Investments and loans 3 1 3 Deferred taxation assets 99 89 105 13 755 11 289 12 328 Current assets Inventories 1 364 1 266 1 286 Accounts receivable and other current assets 3 172 2 838 2 677 Short-term loans 4 23 2 Taxation receivable 50 53 44 Cash and cash equivalents 4 523 1 054 2 602 9 113 5 234 6 611 Total assets 22 868 16 523 18 939 EQUITY AND LIABILITIES Capital and reserves Ordinary stated share capital 8 774 7 318 7 318 Reserves 1 520 719 1 349 10 294 8 037 8 667 Non-controlling interests 314 181 195 Total equity 10 608 8 218 8 862 Non-current liabilities Interest-bearing long-term liabilities 6 449 2 920 4 204 Deferred taxation liabilities 1 614 1 196 1 368 Other long-term liabilities and provisions 130 92 93 8 193 4 208 5 665 Current liabilities Accounts payable, provisions and other current liabilities 3 333 2 714 3 899 Interest-bearing short-term liabilities 527 1 059 431 Taxation payable 43 48 46 Bank overdrafts and short-term facilities 164 276 36 4 067 4 097 4 412 Total equity and liabilities 22 868 16 523 18 939 Net asset value per ordinary share (cents) 387 330 355 Net interest-bearing debt to equity (%) 25% 40% 24% Condensed consolidated statement of cash flows Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm Operating profit before capital items 1 112 898 1 984 Depreciation and amortisation 440 425 806 Net fair value adjustments of consumable biological assets and decrease due to harvesting (4) (15) (43) Other non-cash adjustments 36 45 111 Cash generated before working capital changes 1 584 1 353 2 858 Increase in inventories (74) (98) (73) Increase in receivables (296) (288) (21) (Decrease)/increase in payables (719) (576) 521 Changes in working capital (1 089) (962) 427 Cash generated from operations 495 391 3 285 Dividends received - 2 13 Dividends paid (452) (379) (385) Net finance charges (198) (151) (313) Taxation paid (120) (159) (266) Net cash (outflow)/inflow from operating activities (275) (296) 2 334 Additions to property, plant and equipment (1 221) (840) (1 717) Acquisition of investments (227) - (573) Other investing activities (25) (23) (12) Net cash outflow from investing activities (1 473) (863) (2 302) Net cash (outflow)/inflow from operating and investing activities (1 748) (1 159) 32 Net cash inflow from financing activities 3 686 804 1 174 Net increase/(decrease) in cash and cash equivalents 1 938 (355) 1 206 Effects of exchange rate changes on cash and cash equivalents (17) 39 26 Cash and cash equivalents at beginning of period 2 602 1 370 1 370 Cash and cash equivalents at end of period 4 523 1 054 2 602 Condensed consolidated statement of comprehensive income Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm Profit for the period 657 536 1 193 Other comprehensive (loss)/income Items that may be reclassified subsequently to profit or loss: Exchange differences on translation of foreign subsidiaries (55) 95 53 Total comprehensive income for the period 602 631 1 246 Total comprehensive income attributable to: Owners of the parent 575 606 1 198 Non-controlling interests 27 25 48 Total comprehensive income for the period 602 631 1 246 Segmental analysis Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited % Audited Rm Rm change Rm Revenue Diversified logistics 4 473 4 099 9 7 899 Diversified industrial 4 637 4 142 12 8 440 9 110 8 241 11 16 339 Intersegment revenue eliminations (77) (52) (107) 9 033 8 189 10 16 232 Operating profit before capital items Diversified logistics 488 478 2 1 006 Diversified industrial 624 420 49 978 1 112 898 24 1 984 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm % Rm % Rm % Total assets Diversified logistics 7 153 39 6 151 40 6 267 39 Diversified industrial 11 018 61 9 066 60 9 814 61 18 171 100 15 217 100 16 081 100 Reconciliation of total assets per statement of financial position to total assets per segmental analysis 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm Rm Rm Total assets per statement of financial position 22 868 16 523 18 939 Less: Cash and cash equivalents (4 523) (1 054) (2 602) Less: Investments in associate and joint-venture companies (74) (152) (124) Less: Interest-bearing long-term loans receivable (2) - (2) Less: Interest-bearing short-term loans receivable (1) (23) - Less: Related party receivables (97) (77) (130) Total assets per segmental analysis 18 171 15 217 16 081 Geographical information Six months Six months Year ended ended ended 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Rm % Rm % Rm % Revenue South Africa 8 029 89 7 170 88 14 315 88 Rest of Africa 1 004 11 1 019 12 1 917 12 9 033 100 8 189 100 16 232 100 Non-current assets South Africa 12 609 92 10 117 90 11 112 90 Rest of Africa 1 146 8 1 172 10 1 216 10 13 755 100 11 289 100 12 328 100 Fair values of financial instruments Fair value Fair value Fair value as at as at as at 31 Dec 2016 31 Dec 2015 30 Jun 2016 Unaudited Unaudited Audited Fair value Rm Rm Rm hierarchy Derivative financial assets 2 54 15 Level 2 Derivative financial liabilities (59) - (26) Level 2 Level 2 financial instruments are valued using techniques where all of the inputs that have a significant effect on the valuation are directly or indirectly based on observable market data. These inputs include published interest rate yield curves and foreign exchange rates. Selected explanatory notes 1. Statement of compliance The condensed consolidated interim financial information has been prepared and presented in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the JSE Limited, the information as required by IAS 34: Interim Financial Reporting and the requirements of the South African Companies Act, No. 71 of 2008. The consolidated interim financial information has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 30 June 2016. 2. Basis of preparation The condensed interim financial statements are prepared in millions of South African Rands (Rm) on the historical cost basis, except for certain assets and liabilities, which are carried at amortised cost, and derivative financial instruments and biological assets, which are stated at their fair values. The preparation of the condensed interim financial statements for the six months ended 31 December 2016 was supervised by Frans Olivier, the group´s chief financial officer. 3. Change in accounting policies The accounting policies adopted in the preparation of the condensed interim financial information are consistent with those of the annual financial statements for the year ended 30 June 2016. 4. Financial statements These results have not been reviewed or reported on by the group´s auditors. The results were approved by the board of directors on 13 February 2017. 5. Post-balance sheet events With the exception of the Safripol acquisition referred to elsewhere in this announcement, no significant events have occurred in the period between the end of the period under review and the date of this report. 6. Changes to the board/board committees There were no changes to the board of directors during the period under review. With effect from 1 January 2017 Mr KJ (Jo) Grové retired and as a result will now fulfil the position of non-executive deputy chairman. KAP Industrial Holdings Limited (`KAP´ or `the company´ or `the group´) Non-executive directors: J de V du Toit (Chairman)*, KJ Grové (Deputy chairman), MJ Jooste, AB la Grange, IN Mkhari*, SH Müller*, SH Nomvete*, PK Quarmby*, DM van der Merwe, CJH van Niekerk* Executive directors: GN Chaplin (Chief executive officer), FH Olivier (Chief financial officer) *Independent non-executive directors Registered address 28 6th Street, Wynberg, Sandton, 2090 Postal address PO Box 18, Stellenbosch, 7599 Telephone: 021 808 0900 Facsimile: 021 808 0901 E-mail: info@kap.co.za www.kap.co.za Transfer secretaries Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Bierman Avenue, Rosebank, 2196 Company secretary Steinhoff Secretarial Services Proprietary Limited Auditors Deloitte & Touche Sponsor PSG Capital Proprietary Limited Date: 13/02/2017 01:00:00 Produced by the JSE SENS Department. 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2017-02-13 13:00:00 Source: JSE News Service (SENS) |
KAP Industrial Holdings Ltd. published this content on 13 February 2017 and is solely responsible for the information contained herein.
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