Wrap Text
Voluntary Business Update At AGM
KAAP AGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2011/113185/06)
Share code: KAL
ISIN: ZAE000244711
(“Kaap Agri” or “the Company” or “the Group”)
VOLUNTARY BUSINESS UPDATE AT AGM
Immediately following the annual general meeting (“AGM”) of the Company, that will
be held at 12:30 p.m. today, 9 February 2023 at the Conference Venue,
Lemoenkloof Guesthouse, 3 Malan Street, Paarl, a voluntary business update will be
provided to shareholders by the CEO, Sean Walsh. A presentation relating to the
voluntary business update is available on the Company’s website at
https://www.kaapagri.co.za/s3/attachments/AGM2023_Presentation.pdf
The business update and presentation are focused on the Group’s performance during
the first three months of the 2023 financial year (“Q1”). While the Company does not
report on a quarterly basis, it wishes to provide shareholders with an update on its Q1
performance.
The salient points of the presentation are outlined below:
1. Group statutory revenue increased by 73.8% (17.8% like-for-like (“LFL”))
compared to the first three months of the prior year (“LY”), off the back of slow retail
and agri performance, the inclusion of the newly acquired PEG Retail Holdings
(Pty) Ltd (“PEG”) as well as 26.0% inflation (12.5% inflation when excluding the
impact of fuel price inflation). Transaction growth was encouraging at 6.3% and
increased by 193.6% when including PEG. Gross profit growth was below turnover
growth, largely due to fuel price inflation and lower fuel price opportunity profits
realised.
2. Total Group fuel litres grew by 82.9% (3.2% excluding PEG). Fuel litre
performance was pleasing when considering the fuel volume decreases
experienced in the wider fuel industry.
3. Excluding PEG for comparable purposes, retail-related revenue grew by 7.5% and
agri-related revenue grew by 7.2% compared to LY.
4. The PEG acquisition has been concluded and the business has been successfully
onboarded. Fuel litre growth in PEG has been under pressure, however,
convenience retail sales have outperformed all expectations.
5. Within the Agrimark Grain division, the drier weather conditions in the Western
Cape weighed on the 2022/23 wheat harvest, resulting in a more normalized wheat
harvest compared to the previous two record years. Given the more normalized
wheat harvest, full year profitability will be more aligned to prior years with similar
wheat yields.
6. Expenditure was well managed with LFL expenses growing 2.5%, PEG being non-
LFL. Loadshedding costs have increased significantly, totalling R15.9m for Q1
impeding earnings growth. LFL expenditure, excluding the impact of loadshedding
costs, reduced by 1.8% compared to LY.
7. Earnings and Headline earnings for Q1 grew by 35.6% from R126.0m LY to
R170.8m. Recurring headline earnings (“RHE”) for Q1 grew by 30.9% from
R130.5m to R170.8m. RHE per share for Q1 grew by 19.8% from 179.72 cents to
215.27 cents (6.5% excluding PEG). This growth was driven by strong gross profit
performance, as well as effective operational and support service cost
management. Kaap Agri has historically considered RHE to be the most
appropriate benchmark by which to measure its performance, with RHE being
adjusted from headline earnings to exclude non-recurring expenses
(predominantly, costs associated with acquisitions of new businesses and the
revaluation of put options), in line with the approach applied in the Company’s
annual financial statements for the financial year ended 30 September 2022.
8. The Company’s working capital cycle improved during Q1. Stock growth was at a
rate slower than revenue growth. Debtors’ growth was healthy and not-within-
terms as a % of debtors reduced. The business continued to generate strong
cashflow and comparable debt ratios improved during the period. Return on
invested capital increased during Q1.
9. The overall fruit sector outlook is stable despite lower yields, with an improvement
in logistics and input costs. Wine grape harvests are expected to be lower,
however prices are more favourable. Lower wheat, canola and barley harvests are
currently in storage. The combination of lingering high input costs, rising interest
rates and loadshedding costs are having a detrimental effect on the agricultural
sector. In the general- and convenience retail environments, high inflation,
increased interest rates and high fuel prices have led to increased pressure on
consumers. The acquisition of PEG will contribute an additional nine months of
profitability to the Group this year compared to LY and convenience and quick
service restaurant performance has returned to pre-covid levels, with all sites being
open during loadshedding. Agrimark Online, launched in September 2022, is
gathering momentum. A conservative approach is being applied to new retail fuel
sites and Worcester Mall will be onboarded during the second quarter of the current
financial year (“Q2”). Overall, inflation is expected to normalise during Q2.
Loadshedding will impact full year profitability negatively, however certain
operational interventions are being implemented to partially mitigate this impact.
Given the above and assuming loadshedding continues at similar levels as during
Q1, full year profitability is expected to be in line with the upper range of our
medium-term targets.
10. Various general operational statistics and comments on Environmental, Social and
Governance are included in the presentation.
Shareholders are referred to the above presentation, available on Kaap Agri’s website,
for further details regarding the Group’s Q1 performance.
The information above and in the presentation has not been audited or reviewed or
otherwise reported on by the Company´s external auditors.
Paarl
9 February 2023
Sponsor
PSG Capital
Date: 09-02-2023 10:00:00
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