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Audited Summarised Results For The Year Ended 31 December 2016 And Declaration Of A Scrip Distribution
Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT JSE ISIN: ZAE 000156501
("Mpact" or "the Group" or "the Company")
AUDITED PRELIMINARY SUMMARISED CONSOLIDATED ANNUAL RESULTS FOR THE YEAR ENDED 31
DECEMBER 2016 AND DECLARATION OF SCRIP DISTRIBUTION WITH A CASH DIVIDEND
ALTERNATIVE
SALIENT FEATURES
- Revenue increased by 5.8% to R10.1 billion (December 2015: R9.5 billion)
- Underlying operating profit of R784 million (December 2015: R909 million)
- Underlying earnings per share of 252.7 cents (December 2015: 366.9 cents)
- Return on Capital Employed ("ROCE") of 14.2% (December 2015: 18.9%)
- Gearing at 33.6% (December 2015: 30.2%)
- Total gross dividend of 95 cents per share (December 2015: 110 cents per share)
COMPANY PROFILE
Mpact is one of the leading paper and plastics packaging businesses in southern Africa, listed on
the JSE's Main Board in the Industrial - Paper and Packaging sector. The Group has leading market
positions in southern Africa in recovered paper collection, corrugated packaging, recycled-based
cartonboard and containerboard, polyethylene-terephthalate ("PET") preforms, recycled PET ("rPET"),
styrene trays and plastic jumbo bins. These leading market positions allow Mpact to meet the increasing
requirements of its customers and achieve economies of scale and cost effectiveness at the various
operations.
Mpact has 42 operating sites, of which 21 are manufacturing operations, in South Africa, Namibia,
Mozambique and Botswana. Sales in South Africa account for approximately 90% of Mpact's total
revenue for the current year while the balance was predominantly to customers in the rest of Africa.
As at 31 December 2016 Mpact employed 4,998 people. (December 2015: 4,467 people)
COMMENTARY
The Group results for the year ended 31 December 2016 reflect challenging trading conditions.
The financial results were further negatively impacted by higher recovered paper costs, lower
containerboard sales, a higher effective tax rate and finance costs compared to the prior year,
as well as a loss in Mpact Polymers.
On the positive side, the converting businesses of Paper and Plastics did well to grow revenue and
maintain underlying operating profit margins, building on their good performances a year earlier.
The Group made progress with its strategic investment programme during the year, which included the
acquisition of the Remade Holdings recycling business ("Remade"), the Felixton mill upgrade,
Mpact Polymers and other expansion projects in the Paper and Plastics businesses.
Notwithstanding the significant capital investments, the Group's balance sheet remains strong with
gearing of 33.6% at year end.
Following a review of its prospects and the prevailing economic environment in Zimbabwe, the Group
closed its plastics manufacturing operation in that country in December 2016.
During the year, the Mpact Foundation Trust awarded its first fifteen tertiary education bursaries
to dependents of Mpact employees, following its establishment in 2015.
GROUP PERFORMANCE
Group revenue of R10.1 billion was 5.8% higher than the prior year, with 2.8% of this growth
attributable to the acquisition of Remade. Group sales volumes excluding Remade declined by 6.5%,
primarily due to lower containerboard and recovered paper sales.
Earnings before interest, taxation, depreciation and amortisation declined 3.5% compared to the
prior year.
Notwithstanding the stable performance in the converting operations of Paper and Plastics,
underlying operating profit of R784.4 million was 13.7% lower due to the above factors, as well
as higher recovered paper costs, a loss in Mpact Polymers and a higher depreciation charge.
ROCE for the year was 14.2% (December 2015: 18.9%).
Paper business
Revenue in the Paper business increased 5.2% to R7.4 billion. Excluding Remade, sales volumes
declined 7.0%.
Underlying operating profit of R664.1 million was 17.3% lower, on the back of higher recovered paper
costs and lower external sales volumes.
The Paper converting business delivered a stable performance, growing revenue and maintaining margins,
despite the drought, challenging trading conditions and increased levels of competition.
Lower containerboard sales were a result of certain Mpact customers increasing containerboard
capacity in their own paper mills during the first quarter of the year. This also caused a shortage of
recovered paper, a key raw material, which led to higher input costs that could not be fully recovered
in selling prices, thus further impacting profitability.
Notwithstanding the current imbalance in domestic recycled containerboard supply and demand, we remain
confident in the rationale for the Felixton mill upgrade, which is due to be completed during the
second half of 2017.
Plastics business
Revenue in the Plastics business increased by 8.6% to R2.8 billion due to higher selling prices and a
favourable mix of products sold. Sales volumes in the Plastics converting business were in line with
the prior year. Sales in Mpact Polymers for the year totalled 7,603 tonnes of which 4,310 tonnes were
to external customers.
Underlying operating profit of R168.4 million declined 15.3% from the prior year, mainly as a result of
the loss incurred in Mpact Polymers. The loss in Mpact Polymers was greater than planned during the
ramp-up phase because of higher costs of production and lower average rPET selling prices. All of the
required approvals from major customers have been secured and they are now using Mpact's rPET, SavukaTM,
in their packaging.
The Plastics converting business achieved an underlying operating profit of R255 million with a margin
of 9.4%. The after-tax cost attributable to the closure of the Zimbabwe operation of R30 million is
disclosed as a special item.
Net finance costs
Net finance costs increased by 44.7% to R191.0 million (December 2015: R132.0 million) due to higher
interest rates on higher net debt during the year, as well as the borrowing costs related to the Mpact
Polymers project and Phase 1 of the Felixton mill upgrade no longer being capitalised, following their
commissioning in 2015.
Tax
The effective tax rate for the year was 31.5% (December 2015: 21.8%) which is higher than the statutory
rate of 28%, mainly due to deferred tax on certain tax losses in Mpact Polymers not being recognised.
Earnings per share
Basic and headline earnings per share for the year were 234.6 cents (December 2015: 366.9 cents)
and 242.0 cents (December 2015: 365.8 cents), respectively. Underlying earnings of 252.7 cents per
share decreased by 31.1%.
Net debt
Net debt increased to R2.0 billion (2015: R1.6 billion) with investments in capital projects and the
cost of acquiring Remade being the main contributors to the increase. The gearing ratio was 33.6%
(December 2015: 30.2%).
OUTLOOK
The economic outlook for 2017 remains subdued and most of the factors that impacted negatively on the
profitability of the Group in 2016 are likely to persist.
The completion of the R765 million Felixton mill upgrade, due in the second half of 2017, is on schedule
and within budget. As part of the project, the mill is scheduled to be shut for 50 days starting at the
end of May 2017. This will result in a non-recurring reduction in earnings for the financial year.
Once completed, this upgrade will significantly improve the mill's cost competiveness, product quality
and offering.
We anticipate an improved trading performance in Mpact Polymers on the back of increased demand for rPET,
higher throughput and a better yield. We remain optimistic about the prospects of this business, given
the progress thus far and the need to increase recycling rates of PET.
Our focus in the short term is to improve profitability and ROCE despite the prevailing trading
conditions. In addition, we will continue to pursue strategic growth opportunities across the Group.
These include the expansions of the Port Elizabeth corrugating facility as well as the Mpact Plastics
Containers facilities in Brits and Atlantis, all of which were approved by the Board during 2016.
Scrip Distribution and Cash Dividend alternative
1. Introduction
Notice is hereby given that the Board has declared a final distribution for year ended 31 December
2016, by way of the issue of fully-paid Mpact ordinary shares of no par value each ("the Scrip
Distribution") as a scrip distribution payable to ordinary shareholders ("Shareholders") recorded in
the register of the Company at the close of business on the Record Date, being Friday, 31 March 2017.
Shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive a
gross cash dividend of 65 cents per ordinary share in lieu of the Scrip Distribution, which will be
paid only to those Shareholders who elect to receive the cash dividend, in respect of all or part of
their shareholding, on or before 12:00 on Friday, 31 March 2017 ("the Cash Dividend").
The Cash Dividend has been declared from income reserves. A dividend withholding tax of 20%
will be applicable to all Shareholders not exempt therefrom, after deduction of which the net Cash
Dividend is 52 cents per Mpact ordinary share.
The new ordinary shares will, pursuant to the Scrip Distribution, be settled by way of capitalisation
of the Company's distributable retained profits.
The Company's total number of issued ordinary shares as at 2 March 2017 is 168,485,360.
Mpact's income tax reference number is 9003862175.
2. Terms of the Scrip Distribution
The number of Scrip Distribution shares to which each of the Shareholders will become entitled
pursuant to the Scrip Distribution (to the extent that such Shareholders have not elected to receive
the Cash Dividend) will be determined by reference to such Shareholder's ordinary shareholding in
Mpact (at the close of business on the Record Date, being Friday, 31 March 2017 in relation to the
ratio that 65 cents bears to the volume weighted average price ("VWAP") of an ordinary Mpact
share traded on the JSE during the 30-day trading period ending on Friday, 10 March 2017. Where
the application of this ratio gives rise to a fraction of an ordinary share, in allocations of whole
ordinary shares and a cash payment for the fraction.
The applicable cash payment will be determined with reference to the VWAP of an ordinary Mpact
share traded on the JSE on Wednesday, 29 March 2017, (being the day on which an ordinary
Mpact share begins trading 'ex' the entitlement to receive the Scrip Distribution or the Cash
Dividend alternative), discounted by 10%.
The applicable cash payment will be announced on SENS on Thursday, 30 March 2017.
Details of the ratio will be announced on the Stock Exchange News Service ("SENS") of the JSE in
accordance with the timetable below.
3. Circular and salient dates
A circular providing Shareholders with full information on the Scrip Distribution and the Cash
Dividend alternative, including a Form of Election to elect to receive the Cash Dividend alternative
will be posted to Shareholders on or about Wednesday, 8 March 2017. The salient dates of events
thereafter are as follows:
2017
Announcement released on SENS in respect of the ratio Monday, 13 March
applicable to the Scrip Distribution, based on the 30-day
volume weighted average price ending on Friday, 10 March
2017, by 11:00 on
Announcement published in the press of the ratio applicable to Tuesday, 14 March
the Scrip Distribution, based on the 30-day volume weighted
average price ending on Friday, 10 March 2017
Last day to trade in order to be eligible for the Scrip Distribution Tuesday, 28 March
and the Cash Dividend alternative
Ordinary shares trade "ex" the Scrip Distribution and the Cash Wednesday, 29 March
Dividend alternative on
Listing and trading of maximum possible number of ordinary Wednesday, 29 March
shares on the JSE in terms of the Scrip Distribution from the
commencement of business on
Announcement released on SENS in respect of the cash Thursday, 30 March
payment applicable to fractional entitlements, based on the
volume weighted average price on Wednesday, 29 March
2017, discounted by 10%
Last day to elect to receive the Cash Dividend alternative Friday, 31 March
instead of the Scrip Distribution, Forms of Election to reach the
Transfer Secretaries by 12:00 on
Record Date in respect of the Scrip Distribution and the Cash Friday, 31 March
Dividend alternative
Scrip Distribution certificates posted and Cash Dividend Monday, 3 April
payments made, CSDP/broker accounts credited/updated, as
applicable, on
Announcement relating to the results of the Scrip Distribution Monday, 3 April
and the Cash Dividend alternative released on SENS on
Announcement relating to the results of the Scrip Distribution Tuesday, 4 April
and the Cash Dividend alternative published in the press on
JSE listing of ordinary shares in respect of the Scrip Wednesday, 5 April
Distribution adjusted to reflect the actual number of ordinary
shares issued in terms of the Scrip Distribution at the
commencement of business on or about
All times provided are South African local times. The above dates and times are subject to change.
Any material change will be announced on SENS.
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 March
2017 and Friday, 31 March 2017, both days inclusive.
Change in directorate
On 5 September 2016, Ms. M Makanjee was appointed as non-executive director to the Board.
AJ Phillips BW Strong
Chairman Chief Executive Officer
2 March 2017
Directors:
Independent Non-Executive:
AJ Phillips (Chairman), NP Dongwana, NB Langa-Royds, TDA Ross, AM Thompson, M Makanjee
Executive:
BW Strong (Chief Executive Officer), BDV Clark (Chief Financial Officer)
Company secretary:
MN Sepuru
Registered office:
4th Floor, No.3 Melrose Boulevard, Melrose Arch, 2196
(Postnet Suite #179, Private Bag X1, Melrose Arch, 2076)
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000, South Africa)
Sponsors:
Rand Merchant Bank (a division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
(P O Box 786273, Sandton, 2146)
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Note 2016 2015
R'm R'm
Revenue 10,098.6 9,547.7
Cost of sales (6,281.4) (5,883.0)
Gross margin 3,817.2 3,664.7
Administration and other operating expenses (2,566.9) (2,345.7)
Depreciation, amortisation and impairments (504.0) (410.0)
Operating profit 3 746.3 909.0
Share of profit from equity accounted
investees 16.2 13.0
Profit on sale of equity accounted investees 0.8 0.2
Total profit from operations and equity
accounted investees 763.3 922.2
Net finance costs (191.0) (132.0)
Investment income 18.4 8.7
Finance costs (209.4) (140.7)
Fair value gain 7.2 -
Profit before taxation 579.5 790.2
Tax charge (182.7) (172.4)
Profit for the year 396.8 617.8
Other comprehensive income:
Items that will not be reclassified subsequently to
profit or loss
Actuarial gains on post-retirement benefit scheme 3.6 6.7
Tax effect (1.0) (1.9)
Items that may be reclassified subsequently to
profit or loss
Effects of cash flow hedges (18.3) 8.1
Tax effect 5.1 (2.3)
Exchange differences on translation of foreign
operations (5.6) 7.5
Other comprehensive income for the financial year
net of tax (16.2) 18.1
Total comprehensive income for the year 380.6 635.9
Attributable to:
Non-controlling interests in subsidiaries 6.3 14.6
Equity holders of Mpact 374.3 621.3
380.6 635.9
Profit for the year 396.8 617.8
Attributable to:
Non-controlling interests in subsidiaries 5.7 15.3
Equity holders of Mpact 391.1 602.5
Earnings per share (EPS) for profit attributable to
equity holders of Mpact
Basic EPS (cents) 4 234.6 366.9
Diluted EPS (cents) 4 234.0 363.3
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at year ended 31 December 2016
Note 2016 2015
R'm R'm
Goodwill and other intangible assets 1,126.1 1,066.5
Property, plant and equipment 3,489.0 3,041.2
Investments in equity accounted investees 102.1 90.5
Financial asset investments 41.5 24.6
Deferred tax assets 4.9 15.3
Derivative financial instruments - 13.9
Non-current assets 4,763.6 4,252.0
Inventories 1,393.2 1,275.0
Trade and other receivables 2,103.1 2,013.2
Cash and cash equivalents 405.7 508.9
Derivative financial instruments 2.9 15.1
Current tax receivable 30.9 5.0
Disposal group asset 12.8 -
Current assets 3,948.6 3,817.2
Total assets 8,712.2 8,069.2
Short-term borrowings 990.0 770.0
Trade and other payables 1,772.1 1,855.6
Current tax liabilities 3.3 4.0
Provisions 5.1 3.6
Other current liabilities 51.8 4.6
Derivative financial instruments 8.6 7.0
Deferred income 5.5 5.5
Disposal group liability 10.7 -
Current liabilities 2,847.1 2,650.3
Non-current borrowings 1,417.0 1,331.0
Retirement benefits obligation 51.6 53.0
Deferred tax liabilities 342.5 266.8
Other non-current liabilities - 21.7
Deferred income 29.0 34.6
Derivative financial instruments 4.4 -
Non-current liabilities 1,844.5 1,707.1
Total liabilities 4,691.6 4,357.4
Stated capital 5 2,532.7 2,426.2
Retained earnings 1,346.3 1,170.8
Other reserves 28.3 7.8
Total attributable to equity holders of Mpact 3,907.3 3,604.8
Non-controlling interests in subsidiaries 113.3 107.0
Total equity 4,020.6 3,711.8
Total equity and liabilities 8,712.2 8,069.2
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Note 2016 2015
R'm R'm
Operating cash flows before movements in working capital 1,275.6 1,321.7
Net increase in working capital (288.9) (235.2)
Cash generated from operations 986.7 1,086.5
Dividends from equity accounted investees 5.6 12.5
Taxation paid (142.3) (115.5)
Net cash inflows from operating activities 850.0 983.5
Cash flows from investing activities
Acquisition of subsidiaries, net of cash 6 (89.8) -
Additions to property, plant and equipment and other intangibles (836.5) (979.2)
Government grant received - 31.1
Proceeds from the disposal of property, plant and equipment 8.7 5.1
Proceeds from disposal of associates 1.0 0.4
Loan repayments from/(advances to) external parties 3.6 (4.7)
Interest received 18.4 8.7
Acquisition of non-controlling interest in a subsidiary - (1.4)
Financial asset investment (20.5) -
Net cash outflows from investing activities (914.5) (940.0)
Cash flows from financing activities
Borrowings raised 307.4 253.9
Finance costs paid (212.7) (170.5)
Dividends paid to non-controlling interests (6.3) (4.1)
Dividends paid to equity holders of Mpact Limited Group (76.5) (75.8)
Purchase of treasury shares (25.0) (73.5)
Repayment of other non-current liabilities - 3.2
Payment of deferred settlement charge (4.6) (4.6)
Net cash outflows from financing activities (17.7) (71.4)
Net decrease in cash and cash equivalents (82.8) (27.9)
Cash and cash equivalents at beginning of year 482.8 510.7
Cash and cash equivalents at end of year 400.0 482.8
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Total
Share- Cash Post- attributable
based flow retirement to equity Non-
Stated payment hedge benefit Other Treasury Retained holders of controlling Total
capital reserve reserve reserve reserves1 shares earnings Mpact Ltd interests equity
R'm R'm R'm R'm R'm R'm R'm R'm R'm R'm
Balance at 31 December 2014 2,344.1 29.4 4.2 7.9 6.7 (39.0) 738.0 3,091.3 114.8 3,206.1
Total comprehensive income for the year - - 5.8 4.8 8.2 - 602.5 621.3 14.6 635.9
Dividends paid(2) 82.1 (0.8) (157.1) (75.8) - (75.8)
Purchase of treasury shares(3) - - - - - (73.5) - (73.5) - (73.5)
Share plan charges for the year - 19.6 - - - - - 19.6 - 19.6
Dividends paid to non-controlling interests - - - - - - - - (4.1) (4.1)
Issue /exercise of shares under employee share scheme - (15.2) - - - 49.7 (25.0) 9.5 - 9.5
Increase in shareholding in a subsidiary - - - - - 17.0 17.0 (18.3) (1.3)
Deferred settlement charge - - - - - (4.6) (4.6) - (4.6)
Balance at 31 December 2015 2,426.2 33.8 10.0 12.7 14.9 (63.6) 1,170.8 3,604.8 107.0 3,711.8
Total comprehensive income for the year - - (13.2) 2.6 (6.2) - 391.1 374.3 6.3 380.6
Dividends paid(2) 106.5 - - - - (0.6) (182.4) (76.5) - (76.5)
Purchase of treasury shares(3) - - - - - (25.0) - (25.0) - (25.0)
Share plan charges for the year - 23.1 - - - - - 23.1 - 23.1
Dividends paid to non-controlling interests - - - - - - - - (6.3) (6.3)
Issue /exercise of shares under employee share scheme - (19.5) - - - 59.3 (28.6) 11.2 - 11.2
Increase in shareholding in a subsidiary(4) - - - - - - - - 6.3 6.3
Deferred settlement charge - - - - - - (4.6) (4.6) - (4.6)
Balance at 31 December 2016 2,532.7 37.4 (3.2) 15.3 8.7 (29.9) 1,346.3 3,907.3 113.3 4,020.6
(1) Other reserves consist of the put option to equity holder reserve and the foreign currency translation reserve.
(2) Dividends declared amounted to R182.4 million (2015: R157.1 million) of which R106.5 million (2015: R82.1 million) related to a capitalisation issue.
(3) Treasury shares purchased represent the cost of shares in Mpact Ltd purchased in the market and held by the Mpact Incentive Share Trust to satisfy share awards under the Group's share
incentive scheme. As at 31 December 2016, there are 845,692 (2015: 1,457,388) treasury shares on hand.
(4) In the current year a subsidiary company had a capitalisation issue, whereby the minority shareholder subscribed for additional shares in a group subsidiary.
NOTES TO THE SUMMARISED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
for the year ended 31 December 2016
1. ACCOUNTING POLICIES
Basis of preparation
These preliminary summarised, consolidated financial statements have been prepared in accordance with the framework concepts and
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 Financial Reporting
Standards Council, the JSE Limited's listing requirements and the Companies Act of South Africa and contains at a minimum the
information required by IAS 34: Interim Financial Reporting.
These summarised consolidated financial statements for the year ended 31 December 2016 have been audited by Deloitte & Touche,
who expressed an unmodified opinion thereon. The auditor also expressed an unmodified opinion on the consolidated financial
statements from which these summarised consolidated financial statements were derived. A copy of the auditor's report on the
summarised consolidated financial statements and of the auditor's report on the consolidated financial statements are available for
inspection at the company's registered office, together with the consolidated financial statements. The auditor's report does not
necessarily report on all of the information contained in this announcement. 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 that report together with the
accompanying financial information from the registered office of the company. Any reference to future financial performance
included in this announcement has not been reviewed or reported on the Company's auditors.
The preparation of these summarised consolidated financial statements was supervised by the chief financial officer, BDV Clark
CA(SA).
The directors take full responsibility for the preparation of the summarised consolidated financial statements and the financial
information has been correctly extracted from the underlying consolidated financial statements.
Accounting policies
The accounting policies and methods of computation used are consistent with those applied in the preparation of the Group annual
financial statements.
Special items
Special items are those items of financial performance that the Group believes should be separately disclosed to assist in the
understanding of the underlying financial performance achieved by the Group and its businesses. Such items are material by nature
or amount to the financial year's results.
2. OPERATING SEGMENTS
Operating segment revenue
2016 2015
Segment Internal External Segment Internal External
revenue revenue1 revenue revenue revenue1 revenue
R'm R'm R'm R'm R'm R'm
Paper 7,425.0 (78.5) 7,346.5 7,060.1 (45.8) 7,014.3
Plastics 2,752.1 - 2,752.1 2,533.4 - 2,533.4
Segments total 10,177.1 (78.5) 10,098.6 9,593.5 (45.8) 9,547.7
(1) Inter-segment transactions are conducted on an arm's length basis.
2016 2015
R'm R'm
Operating segment underlying operating profit/(loss)
Paper 664.1 802.7
Plastics 168.4 199.0
Corporate (48.1) (92.7)
Segments total before special items 784.4 909.0
Special items(1) (38.1) -
Share of profit from equity accounted investees 16.2 13.0
Net finance costs (191.0) (132.0)
Fair value gain 7.2 -
Profit on sale of equity accounted investee 0.8 0.2
Profit before tax 579.5 790.2
Significant components of operating profit
Depreciation, amortisation and impairment
Paper 272.7 233.6
Plastics 209.8 157.4
Corporate 21.5 19.0
Segments total 504.0 410.0
Operating segment assets
Segment assets(2)
Paper 4,763.5 4,247.4
Plastics 2,009.2 1,858.7
Corporate 1,244.2 1,184.8
Inter-segment elimination (20.9) (6.4)
Segment total 7,996.0 7,284.5
Unallocated:
Investments in equity accounted investees 102.1 90.5
Deferred tax assets 4.9 15.3
Other non-operating assets(3) 149.2 145.4
Non-current assets held for sale 12.8 -
Trading assets 8,265.0 7,535.7
Financial asset investments 41.5 24.6
Cash and cash equivalents 405.7 508.9
Total assets 8,712.2 8,069.2
(1) Special items include impairment charged on property, plant and equipment of R15.9 million (2015: Rnil), and restructure costs of
R22.2 million (2015: Rnil).
(2) Segment assets are operating assets and as at 31 December 2016 consist of property, plant and equipment of
R3,489.0 million (2015: R3,041.2 million), goodwill and other intangible assets of R1,126.1 million (2015: R1,066.5 million).
inventories of R1,393.2 million (2015: R1,275.0 million) and operating receivables of R1,987.7 million (2015: R1,901.8 million).
(3) Other non-operating assets consist of derivative assets of R2.9 million (2015: R29.0 million), other non-operating
receivables of R115.4 million (2015: R111.4 million) and current tax receivable of R30.9 million (2015: R5.0 million).
2016 2015
R'm R'm
3. OPERATING PROFIT
Operating profit for the year has been arrived at after
charging:
Impairment charge of property, plant and equipment 15.9 -
Depreciation of property, plant and equipment 476.2 400.1
Amortisation of intangibles 11.9 9.9
4. EARNINGS PER SHARE
Cents per share
2016 2015
Earnings per share (EPS)
Basic EPS 234.6 366.9
Diluted EPS 234.0 363.3
Headline earnings per share for the financial year(1)
Basic headline EPS 242.0 365.8
Diluted headline EPS 241.4 362.2
Underlying earnings per share for the financial year(2)
Basic underlying EPS 252.7 366.9
Diluted underlying EPS 252.0 363.3
(1) The presentation of Headline EPS is mandated under the JSE Listings Requirements. Headline earnings has been calculated
in accordance with Circular 2/2015, 'Headline Earnings', as issued by the South African Institute of Chartered Accountants.
(2) Underlying earnings is arrived at after adjusting profit attributable to equity holders of Mpact for special items, net of tax.
(See note 2, segment operating profit).
The calculation of basic and diluted EPS and basic and diluted headline EPS is based on the following data:
Earnings
2016 2015
R'm R'm
Profit for the financial year attributable to equity holders of Mpact 391.1 602.5
Impairment of tangible assets 15.9 -
Profit on sale of equity accounted investees (0.8) (0.2)
Profit on disposal of tangible assets (1.1) (2.4)
Related tax (1.6) 0.8
Headline earnings for the financial year 403.5 600.7
Weighted number of shares
2016 2015
Weighted average number of ordinary shares in issue 166,734,753 164,218,439
Effect of dilutive potential ordinary shares(1) 436,392 1,626,716
Diluted number of ordinary shares in issue 167,171,145 165,845,155
(1) Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue, on the assumption of
conversion of all potentially dilutive ordinary shares.
5. STATED CAPITAL
2016 2015
R'm R'm
Authorised share capital
217,500,000 shares of no par value - -
Issued share capital
Issue of shares of no par value 2,426.2 2,344.1
Capitalisation issue 106.5 82.1
2,532.7 2,426.2
During the year 2,526,741 new ordinary shares were issued to shareholders who elected to receive capitalisation shares in
terms of the scrip distribution. As at 31 December 2016, 168,485,360 shares were in issue (2015: 165,958,619).
6. BUSINESS COMBINATIONS
2016
R'm
(a) On 1 May 2016 the Group acquired a 100% interest in six property companies at fair value
for a total cash purchase consideration of R38.6 million. Details of the aggregated fair
value of the net assets acquired are as follows:
Property, plant and equipment(3) 52.8
Trade receivables 0.3
Financial assets 3.2
Cash 1.4
Trade and other payables (0.3)
Shareholder loan (31.1)
Deferred tax liability (9.9)
Taxation liability (0.3)
Financial liabilities (8.6)
Net assets acquired 7.5
Shareholder's loan acquired 31.1
Purchase consideration 38.6
Cash acquired (1.4)
Net cash outflow 37.2
(b) On 1 May 2016 the Group acquired a 100% interest in Remade Holdings (Pty) Ltd for a
purchase consideration of R89.1 million. Details of the fair value of the net assets acquired
are as follows:
Intangible assets 47.0
Property, plant and equipment 55.5
Investments 1.2
Inventories 4.7
Trade receivables 27.9
Cash 3.8
Trade and other payables (20.5)
Finance lease obligations (26.8)
Deferred tax liability (21.9)
Provisions (2.9)
Taxation liability (2.3)
Financial liabilities (0.5)
Net assets acquired 65.2
Goodwill on acquisition 23.9
Purchase consideration 89.1
Contingent consideration(1) (32.7)
Cash acquired (3.8)
Net cash outflow 52.6
(1) The contingent consideration is based on a multiple of targeted future earnings, of which a 100% outcome has been projected.
(2) Revenue and profits arising from the above acquisitions are not material to the Group. The acquisition of Remade Holdings
(Pty) Ltd complements a number of initiatives by Mpact Recycling to expand its own collections of paper and plastics and to
increase recycling rates of these materials in South Africa. These initiatives increase the material available for the Felixton Mill,
Mpact Polymers and the recently commissioned liquid packaging recycling plant at the Springs Paper Mill.
(3) The properties acquired via the Property Companies are to be held for use for normal trading of the Group.
7. CAPITAL COMMITMENTS
2016 2015
R'm R'm
Contracted for 361.9 443.0
Approved, not yet contracted for 572.5 885.6
934.4 1,328.6
The capital commitments will be financed from existing cash resources and unutilised borrowing facilities.
8. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
a. Contingent liabilities for the Group comprise aggregate amounts at 31 December 2016 of R7.1 million (2015: R17.4 million)
in respect of loans and guarantees given to banks and other third parties.
b. A Group mill is the subject of a land claim, which should not have a material impact on the financial position of the Group.
c. In 2013 a settlement was reached in respect of a dispute relating to the valuation of put options in a group subsidiary. The
settlement agreement provides for a deferred payment contingent upon the achievement of certain EBITDA and ROCE
levels for the years 2017 to 2018, subject to a maximum amount of R1.9 million (2015: R6.5 million).
d. There were no significant contingent assets for the Group at 31 December 2016 and 31 December 2015.
e. As advised to the shareholders on 26 May 2016, the Group is subject to a Competition Commission investigation. The
Directors are unable at this stage to determine what the outcome of the investigation will be.
9. FAIR VALUE ESTIMATION
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) are
determined using standard valuation techniques. These valuation techniques maximise the use of observable market data were
available and rely as little as possible on Group specific estimates.
The significant inputs required to fair value all of the Group's financial instruments are observable.
Specific valuation methodologies used to value financial instruments include:
- the fair values of interest rate swaps and foreign exchange contracts are calculated as the present value of expected future
cash flows based on observable yield curves and exchange rates;
- other techniques, including discounted cash flow analysis, are used to determine the fair values of other financial
instruments.
Financial instruments by category
At fair value Available
Fair value Loans and through for
2016 hierarchy receivables profit or loss Sale Total
R'm R'm R'm R'm R'm
Financial assets
Trade and other receivables Level 2 2,103.1 - - 2,103.1
Loans receivable Level 3 21.0 - - 21.0
Available for sale investment Level 3 - - 20.5 20.5
Derivative financial instruments Level 2 - 2.9 - 2.9
Total 2,124.1 2.9 20.5 2,147.5
At fair value
Fair value Loans and through profit
2015 hierarchy receivables or loss Total
R'm R'm R'm
Financial assets
Trade and other receivables Level 2 2,013.2 - 2,013.2
Financial asset investments Level 3 24.6 - 24.6
Derivative financial instruments Level 2 - 29.0 29.0
Total 2,037.8 29.0 2,066.8
At fair value At
Fair value through profit amortised
2016 hierarchy or loss cost Total
R'm R'm R'm
Financial liabilities
Borrowings Level 3 - (2,407.0) (2,407.0)
Trade and other payables Level 2 - (1,798.3) (1,798.3)
Derivative financial instrument Level 2 (13.0) - (13.0)
Total (13.0) (4,205.3) (4,218.3)
At fair value At
Fair value through profit amortised
2015 hierarchy or loss cost Total
R'm R'm R'm
Financial liabilities
Borrowings Level 3 - (2,101.0) (2,101.0)
Trade and other payables Level 2 - (1,855.6) (1,855.6)
Derivative financial instrument Level 2 (7.0) - (7.0)
Total (7.0) (3,956.6) (3,963.6)
10. EVENTS OCCURRING AFTER THE REPORTING DATE
There were no significant or material subsequent events which would require adjustment to or disclosure of in the annual
financial statements.
Date: 02/03/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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