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Audited Results for the year ended 30 June 2015
KAP Industrial Holdings Limited
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000171963
("KAP" or "the company" or "the group")
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2015
KAP is a diversified industrial business focused on growth in African markets
Revenue from
continuing
operations
up by 8%
Headline earnings
per share from
continuing
operations
up by 19%
Cash generated
from operations
up by 20%
Gearing
reduced
to 27%
from 40%
Dividend per share
up by 25%
Corporate review
The group continued to invest in strategically aligned established businesses with
high barriers to entry which enhance the group's quality of earnings in respect of
sustainability, solid margins and cash generation. This resulted in the following
strategic initiatives being implemented during the year:
- The acquisition of Restonic was successfully concluded, and good progress was
made in creating an Integrated Bedding division with a national manufacturing
and distribution footprint.
- The non-core Footwear business and the Weatherboard sawmill with its associated
plantations were disposed of and the Fresh Freight business discontinued.
- The rationalisation of the group's Integrated Timber and Manufacturing divisions
into a single Diversified Industrial segment and the consolidation of the Fuel,
Agriculture & Mining and the Freight & Logistics divisions of Unitrans into a
single Unitrans Logistics division were concluded during the year. This has resulted
in streamlined management structures, improved systems and controls,
and greater market focus.
During the year under review the group also continued to further its strategy of
strengthening its position as a market leader in the industries that it serves in Africa.
The implementation of the group's strategy produced pleasing financial results for the year.
DIVERSIFIED LOGISTICS
UNITRANS LOGISTICS
Specialised contractual
supply chain and
logistics services
PASSENGER TRANSPORT
Personnel, commuter,
intercity and tourism
transport
DIVERSIFIED INDUSTRIAL
TIMBER
Forestry and timber
operations with
primary and secondary
manufacturing
CHEMICAL
Manufacture of PET,
resin and formaldehyde
AUTOMOTIVE COMPONENTS
Manufacture of
components used in
new vehicle assembly
INTEGRATED BEDDING
Manufacture of foam,
fabrics, springs, bases
and mattresses
Operational review
DIVERSIFIED LOGISTICS
The Diversified Logistics segment increased revenue by 2% to R7 863 million
despite the subdued economic environment and the termination of certain low
return contracts.
Increased logistics activity in the food, agriculture and infrastructure sectors offset
reduced activity in the mining and furniture sectors. The fuel distribution sector
remained stable for the year. Focus on growth in Africa continued across all sectors,
including Passenger where a new personnel transport contract in Mozambique was
successfully commissioned and expanded during the year.
The quality of revenue was enhanced during the year through a focused reallocation
of capital to specific activities within strategic sectors where acceptable returns
can be generated.
Cost-saving initiatives, efficiency improvements and the termination of low
return contracts resulted in an improvement in operating margin to 11.2% from
10.4%. A lower weighted average fuel price during the year had little effect on
the contractual logistics business since this benefit is contractually passed on to
customers. The Passenger business however benefited from the lower weighted
average fuel price.
DIVERSIFIED INDUSTRIAL
The Diversified Industrial segment increased revenue by 13% to R7 885 million for the year.
The second phase upgrade of the MDF plant in Boksburg was successfully concluded during the year.
Increased MDF volumes were targeted toward import replacement, which, together with a 21%
increase in particleboard exports, resulted in a 13% increase in revenue despite a contraction in
domestic demand. Operating margin improved as a result of the technology and efficiency benefits of
the MDF upgrade and continued operational and logistics savings.
The Chemical division (Hosaf and Woodchem) increased revenue by 3% for the year. Woodchem
expanded capacity in order to benefit from market share growth. Currency and underlying raw material
commodity price volatility was well managed during the year, thereby protecting margins.
Revenue in the Automotive Components division increased by 30% for the year, primarily as a result of
increased build volumes in the automotive sector, the successful start-up of certain new models, and
increased parts penetration by the business.
Following the acquisition of Restonic on 2 January 2015, the furniture components business was
restructured in order to facilitate the formation of an Integrated Bedding division. This led to
the closure of BCM and an improved performance at Vitafoam and DesleeMattex. Restonic performed to
expectation for the second half of the year. The division grew revenue by 27% from continuing
operations including Restonic for six months.
Financial review
These are provisional audited results for the year ended 30 June 2015.
The following operations are disclosed as discontinued operations:
- Fresh Freight in the Diversified Logistics segment, and
- Footwear, Weatherboard/Braecroft and BCM in the Diversified Industrial segment.
Revenue and operating profit before capital items
Revenue from continuing operations increased by 8% to R15 664 million from R14 471 million,
with growth mainly from the Diversified Industrial segment.
Operating profit before capital items from continuing operations increased by 13% to
R1 666 million from R1 480 million, resulting in margins increasing to 10.6% from 10.2%. The
operating profit of the Diversified Logistics segment increased by 10% to R880 million from
R801 million, resulting in margins increasing to 11.2% from 10.4%. The operating profit of the
Diversified Industrial segment increased by 16% to R786 million from R679 million, resulting
in margins increasing to 10.0% from 9.7%.
Tax rate
The effective tax rate increased to 27.2% from 26.5%, as a result of a change in the mix of
earnings in various tax jurisdictions across the group.
Cash flow
Cash generated from operations increased by 20% to R2 275 million from R1 888 million. The
conversion ratio of operating profit before capital items into cash generated from operations
increased to 137% from 129%.
Replacement capital expenditure, net of disposal proceeds and government grants, of
R683 million continues to be managed in relation to the depreciation charge. Expansion
capital expenditure of R512 million was invested throughout the group in order to capitalise
on growth opportunities within the group's strategic parameters.
During the year, R290 million was received as net proceeds on the disposal of the
Footwear business, and R180 million was received as net proceeds on the disposal of the
Weatherboard/Braecroft business. R142 million was paid in respect of the cash portion for
the acquisition of Restonic in January 2015.
Debt structure and finance costs
Net interest-bearing debt reduced to R2 089 million from R2 676 million, which resulted in a
further reduction in the gearing ratio to 27% from 40%. The debt structure and cover ratios
are reflected as follows:
30 June 2015 30 June 2014
Debt structure Rm Rm
Interest-bearing long-term liabilities 3 129 3 436
Interest-bearing short-term liabilities 327 68
Bank overdrafts and short-term facilities 3 520
Cash and cash equivalents (1 370) (1 348)
Net interest-bearing debt 2 089 2 676
Total equity (excluding non-controlling interests) 7 761 6 709
Net interest-bearing debt: equity 27% 40%
EBITDA* 2 450 2 230
Net finance charges* 289 327
EBITDA: interest cover (times) 8.5 6.8
Net debt: EBITDA (times) 0.9 1.2
*From continuing operations
Working capital
Net working capital increased to R398 million from R252 million mainly due to the reduced
utilisation of creditor funding and the inclusion of Restonic. Inventories and accounts
receivable were largely unchanged. The net working capital investment remains low relative
to revenue of the group.
Headline earnings per share (HEPS)
HEPS including discontinued operations increased by 19% to 40.2 cents from 33.8 cents in
the comparative period. HEPS from continuing operations increased by 19% to 40.6 cents
from 34.1 cents in the comparative period.
Net asset value (NAV)
The NAV per share increased to 320 cents from 286 cents in the comparative period.
Outlook
Management believes that economic activity in South Africa will remain subdued for the
foreseeable future and therefore continues to optimise the group's existing operations, to
focus on market share growth and on growth in the rest of Africa.
To this end the group will expand its Hosaf facility in order to increase PET production and will
upgrade its Piet Retief particleboard plant in order to benefit from technology advancements,
including raw material savings. The installation of a gloss finishing line at PG Bison's Boksburg
operation, to be commissioned in July 2016, is expected to further enhance the group's value-
adding strategy. The installation of the paper impregnation line at Woodchem is progressing
well with commissioning expected in November 2015. The efficiency and marketing
opportunities resulting from the creation of the Integrated Bedding division are expected to
bear fruit in the 2016 financial year.
The consolidation of the Unitrans divisions into a single operation is expected to yield
efficiency benefits and cost savings, and to unlock growth opportunities in South Africa and
the rest of Africa through a more focused approach within certain sectors.
The group continues to seek out and pursue growth opportunities in accordance with its
strategy. In view of the strong cash generation and reduced gearing, the group is well
positioned to take advantage of opportunities as they arise.
Appreciation
The board of directors records its appreciation for the continued support and loyalty of the
group's employees, shareholders, customers and suppliers.
Final dividend announcement
The board is pleased to announce a gross dividend of 15 cents per share (prior year: 12 cents
per share) for the year ended 30 June 2015 has been approved.
On behalf of the board
J de V du Toit KJ Grové GN Chaplin
Independent non-executive chairman Executive deputy chairman Chief executive officer
18 August 2015
KAP Industrial Holdings Limited
("KAP" or "the company" or "the group")
Non-executive directors: J de V du Toit (Chairman)*, MJ Jooste, AB la Grange, IN Mkhari*, SH Müller*, SH Nomvete*,
PK Quarmby*, DM van der Merwe, CJH van Niekerk
Executive directors: KJ Grové (Executive deputy chairman), GN Chaplin (Chief executive officer), JP Haveman
(Chief financial officer)
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000171963
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
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
Company secretary: Steinhoff Africa Secretarial Services Proprietary Limited
Auditors: Deloitte & Touche
Sponsor: PSG Capital Proprietary Limited
*Independent non-executive directors
Summarised consolidated financial statements
SUMMARISED CONSOLIDATED Year ended Year ended
INCOME STATEMENT 30 June 2015 30 June 2014
Audited Audited(*) %
Notes Rm Rm change
Revenue 15 664 14 471 8
Operating profit before depreciation, amortisation and capital items 2 450 2 230 10
Depreciation and amortisation (784) (750)
Operating profit before capital items 1 666 1 480 13
Capital items 1 (35) (8)
Earnings before interest, dividend income, associate and joint venture
earnings and taxation 1 631 1 472 11
Net finance charges (289) (327) 12
Share of loss of associate and joint venture companies – (5)
Profit before taxation 1 342 1 140 18
Taxation (361) (309) 17
Profit for the year from continuing operations 981 831 18
Loss for the year from discontinued operations 2 (51) (74)
Profit for the year 930 757 23
Attributable to:
Owners of the parent 888 724 23
Non-controlling interests 42 33
Profit for the year 930 757 23
From continuing and discontinued operations:
Headline earnings per ordinary share (cents) 40.2 33.8 19
Fully diluted headline earnings per ordinary share (cents) 39.6 33.4 19
Basic earnings per ordinary share (cents) 37.2 30.9 20
Fully diluted earnings per ordinary share (cents) 36.7 30.5 20
From continuing operations:
Headline earnings per ordinary share (cents) 40.6 34.1 19
Fully diluted headline earnings per ordinary share (cents) 40.1 33.8 19
Basic earnings per ordinary share (cents) 39.4 34.0 16
Fully diluted earnings per ordinary share (cents) 38.8 33.6 15
Number of ordinary shares in issue (m) 2 423 2 346 3
Weighted average number of ordinary shares in issue (m) 2 384 2 346 2
Earnings attributable to ordinary shareholders (Rm) 888 724 23
Headline earnings attributable to ordinary shareholders (Rm) 3 959 792 21
Year ended Year ended
ADDITIONAL INFORMATION 30 June 2015 30 June 2014
Audited Audited (*)
Rm Rm
Note 1: Capital items
From continuing operations:
Loss on disposal of property, plant and equipment and investment properties (1) (6)
Loss on disposal of investments and impairments (34) (2)
(35) (8)
From discontinued operations:
Loss on disposal of property, plant and equipment and investment properties (6) (2)
Loss on disposal of investments and impairments (51) (87)
(57) (89)
(92) (97)
Note 2: Loss for the year from discontinued operations
Revenue 474 1 322
Loss before depreciation, amortisation and capital items (1) (2)
Depreciation and amortisation (7) (16)
Loss before capital items (8) (18)
Capital items (note 1) (57) (89)
Loss before interest, dividend income, associate and joint venture earnings and taxation (65) (107)
Net finance charges – (3)
Loss before taxation (65) (110)
Taxation 14 36
Loss for the year from discontinued operations (51) (74)
Note 3: Headline earnings attributable to ordinary shareholders
Earnings attributable to owners of the parent 888 724
Adjusted for:
Capital items (note 1) 92 97
Taxation effects of capital items (21) (30)
Non-controlling interests' portion of capital items (net of taxation) 1 –
Capital items of associate and joint venture companies (net of taxation) (1) 1
959 792
FAIR VALUES OF FINANCIAL INSTRUMENTS Fair value Fair value
as at as at
30 June 2015 30 June 2014 Fair value
Audited Audited hierarchy
Rm Rm Audited
Derivative financial assets 3 1 Level 2
Derivative financial liabilities (3) (4) 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.
SUMMARISED CONSOLIDATED STATEMENT 30 June 2015 30 June 2014
OF FINANCIAL POSITION Audited Audited (*)
Rm Rm
ASSETS
Non-current assets
Goodwill and intangible assets 1 598 1 290
Property, plant and equipment and investment properties 7 129 6 633
Consumable biological assets 1 824 1 875
Investments in associate and joint venture companies 140 145
Investments and loans 1 26
Deferred taxation assets 85 70
10 777 10 039
Current assets
Inventories 1 179 1 197
Accounts receivable and other current assets 2 575 2 528
Short-term loans 23 17
Cash and cash equivalents 1 370 1 348
Assets classified as held for sale – 428
5 147 5 518
Total assets 15 924 15 557
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated share capital 7 318 6 970
Reserves 443 (261)
7 761 6 709
Non-controlling interests 169 150
Total equity 7 930 6 859
Non-current liabilities
Interest-bearing long-term liabilities 3 129 3 436
Deferred taxation liabilities 1 086 994
Other long-term liabilities and provisions 93 89
4 308 4 519
Current liabilities
Accounts payable, provisions and other current liabilities 3 356 3 473
Interest-bearing short-term liabilities 327 68
Bank overdrafts and short-term facilities 3 520
Liabilities classified as held for sale – 118
3 686 4 179
Total equity and liabilities 15 924 15 557
Net asset value per ordinary share (cents) 320 286
Net interest-bearing debt to equity (%) 27 40
SUMMARISED CONSOLIDATED STATEMENT Year ended Year ended
OF COMPREHENSIVE INCOME 30 June 2015 30 June 2014
Audited Audited
Rm Rm
Profit for the year 930 757
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss:
Actuarial loss on defined benefit plans – (2)
Deferred taxation – 1
– (1)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries 27 16
27 16
Other comprehensive income for the year 27 15
Total comprehensive income for the year 957 772
Total comprehensive income attributable to:
Owners of the parent 916 739
Non-controlling interests 41 33
Total comprehensive income for the year 957 772
SUMMARISED CONSOLIDATED STATEMENT Year ended Year ended
OF CHANGES IN EQUITY 30 June 2015 30 June 2014
Audited Audited
Rm Rm
Balance at beginning of the year 6 859 6 301
Changes in ordinary stated share capital
Net shares issued 348 –
Changes in reserves
Total comprehensive income for the year attributable to owners of the parent 916 739
Dividends and capital distributions paid (286) (232)
Share-based payments 71 33
Other reserve movements 3 3
Changes in non-controlling interests
Total comprehensive income for the year attributable to non-controlling interests 41 33
Dividends and capital distributions paid (22) (12)
Shares bought from non-controlling interests – (6)
Balance at end of the year 7 930 6 859
Comprising:
Ordinary stated share capital 7 318 6 970
Reverse acquisition reserve (3 952) (3 952)
Distributable reserves 4 212 3 598
Share-based payment reserve 128 57
Other reserves 55 36
Non-controlling interests 169 150
7 930 6 859
SUMMARISED CONSOLIDATED STATEMENT Year ended Year ended
OF CASH FLOWS 30 June 2015 30 June 2014
Audited Audited (*)
Rm Rm
Operating profit before capital items 1 666 1 480
Depreciation and amortisation 784 750
Operating loss before depreciation, amortisation and capital items from discontinued operations (1) (2)
Net fair value adjustments of consumable biological assets and decrease due to harvesting (86) (114)
Other non-cash adjustments 114 (43)
Cash generated before working capital changes 2 477 2 071
Decrease/(increase) in inventories 1 (39)
Increase in receivables (17) (249)
(Decrease)/increase in payables (186) 105
Changes in working capital (202) (183)
Cash generated from operations 2 275 1 888
Dividends received 2 5
Dividends paid (304) (200)
Net finance charges (290) (330)
Taxation paid (200) (125)
Net cash inflow from operating activities 1 483 1 238
Additions to property, plant and equipment – expansion (512) (413)
Additions to property, plant and equipment – replacement, net of proceeds and government grants
received (683) (653)
Proceeds on disposal of investments 470 278
Acquisition of investments (142) (2)
Other investing activities (7) (48)
Net cash outflow from investing activities (874) (838)
Net cash inflow from operating and investing activities 609 400
Net cash outflow from financing activities (602) (385)
Net increase in cash and cash equivalents 7 15
Effects of exchange rate changes on cash and cash equivalents 15 13
Cash and cash equivalents at beginning of year 1 348 1 320
Cash and cash equivalents at end of year 1 370 1 348
SEGMENTAL ANALYSIS Year ended Year ended
30 June 2015 30 June 2014
Audited Audited (*) %
Rm Rm change
Revenue from continuing operations
Diversified Logistics 7 863 7 705 2
Diversified Industrial 7 885 6 967 13
15 748 14 672 7
Intersegment revenue eliminations (84) (201)
15 664 14 471 8
Operating profit before capital items from continuing operations
Diversified Logistics 880 801 10
Diversified Industrial 786 679 16
1 666 1 480 13
30 June 2015 30 June 2014
Audited Audited (*)
Rm % Rm %
Total assets
Diversified Logistics 5 624 39 5 520 39
Diversified Industrial 8 616 61 8 501 61
14 240 100 14 021 100
RECONCILIATION OF TOTAL ASSETS PER STATEMENT 30 June 2015 30 June 2014
OF FINANCIAL POSITION TO TOTAL ASSETS PER Audited Audited
SEGMENTAL ANALYSIS Rm Rm
Total assets per statement of financial position 15 924 15 557
Less: Cash and cash equivalents (1 370) (1 348)
Less: Investments in associate and joint venture companies (140) (145)
Less: Interest-bearing long-term loans receivable – (26)
Less: Interest-bearing short-term loans receivable (23) (17)
Less: Related party receivables (151) –
Total assets per segmental analysis 14 240 14 021
GEOGRAPHICAL INFORMATION Year ended Year ended
30 June 2015 30 June 2014
Audited Audited (*)
Rm % Rm %
Revenue
South Africa 13 856 88 12 862 89
Rest of Africa 1 808 12 1 609 11
15 664 100 14 471 100
Non-current assets
South Africa 9 720 90 9 184 91
Rest of Africa 1 057 10 855 9
10 777 100 10 039 100
(*) Prior period disclosure has been restated to reflect discontinued operations as well as the new segments in which the group is
now structured.
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance
The summarised consolidated financial statements have 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 as amended. The summarised consolidated financial
statements have 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 2014 except
for the changes mentioned in note 5 below.
2. Basis of preparation
The summarised consolidated 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 summarised consolidated financial statements for the
year ended 30 June 2015 was supervised by John Haveman, the group's chief financial officer.
3. Changes to comparative results
In addition to treating the Footwear business as discontinued operations, the prior year's income
statement has been re-presented to reflect the additional discontinued operations of Fresh
Freight, Bedding Component manufacturers ("BCM") and Weatherboard sawmill and Braecroft
plantations ("Weatherboard/Braecroft"). The comparative information in the segmental analysis
was also restated in the new segments in which the group is now structured, i.e. Diversified
Logistics and Diversified Industrial.
4. Financial statements
The consolidated financial statements for the year have been audited by Deloitte & Touche, and
their accompanying unmodified audit report as well as their unmodified audit report on this set
of summarised financial information is available for inspection at the company's registered office.
Information included under the headings "Outlook" and "Operational review" and any reference to
future financial information included in the summarised financial information has not been audited
or reviewed. Shareholders are therefore advised that in order to obtain a full understanding of the
nature of the auditor's engagement they should obtain a copy of their report with the accompanying
financial information from the company's registered office. Full details of the group's business
combinations for the year, additions and disposals of property, plant and equipment as well as
commitments and contingent liabilities will be included in the group's Integrated Annual Report to
be published. The results were approved by the board of directors on 18 August 2015.
5. Changes in accounting policies
The accounting policies of the group have been applied consistently to the periods presented
in the summarised consolidated financial statements, except for the adoption of the following
standards during the year which did not affect the results of the group:
IAS 27 – Consolidated and separate financial statements – Equity method in separate financial
statements
IAS 36 – Impairment of assets – Recoverable amount disclosures of non-financial assets
IAS 39 – Financial instruments: recognition and measurement – Novation of derivatives and
continuation of hedge accounting
IFRIC 21 – Levies
6. Post-balance sheet events
No significant events have occurred in the period between the end of the period under review
and the date of this report.
7. Changes to the board/board committees
With effect from 18 November 2014, Mr JB Magwaza, independent non-executive director,
retired from the board, Mr KJ Grové stepped down as chief executive officer and was
appointed executive deputy chairman and Mr GN Chaplin was appointed chief executive officer.
Mr SH Müller replaced Mr Magwaza as chairman of the company's human resources and
remuneration committee. With effect from 18 May 2015, Mrs IN Mkhari has been appointed as
chairperson of the company's newly constituted social and ethics committee.
8. Dividend timetable
The timetable in respect of the dividend is as follows:
Day Event
Friday, 25 September 2015 Last day to trade
Monday, 28 September 2015 Shares trade ex dividend
Friday, 2 October 2015 Date to be recorded in the register to receive the dividend
Monday, 5 October 2015 Payment date
Share certificates may not be demateralised or remateralised between Monday,
28 September 2015 and Friday, 2 October 2015.
In terms of the taxation on dividends and the amendments to section 11.17 of the JSE Listings
Requirements, the following additional information is disclosed:
(1) Local dividend tax rate is 15%.
(2) Dividends are to be paid from income reserves.
(3) The withholding tax, if applicable at the rate of 15%, will result in a net cash dividend per
share of 12.75 cents.
(4) The issued ordinary share capital of KAP Industrial Holdings Limited is 2 422 812 158 shares
at 18 August 2015.
(5) KAP Industrial Holdings Limited's tax reference number is 9999/509/71/5.
www.kap.co.za
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