Wrap Text
Audited Results for the year ended 30 June 2012
KAP International Holdings Ltd
("KAP" or "the Company" or "the Group")
Registration number: 1978/000181/06
JSE share code: KAP
ISIN: ZAE000059564
Audited Results
for the year ended 30 June 2012
Headline earnings of 24,2 cents per share
Operating cash flow grows by 31% to R1 906 m
Acquisition of Steinhoff Industrial and Logistics assets completed
Dividend of 6 cents per share
CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
30 June 2012 30 June 2011
Audited Audited
Rm Rm
ASSETS
Non-current assets
Intangible assets and goodwill 1 311 1 231
Property, plant and equipment, investment
properties 6 129 4 925
Consumable biological assets 1 656 1 450
Investments and loans 83 188
Deferred taxation assets 76 96
9 255 7 890
Current assets
Inventories 1 367 588
Accounts receivable, short-term loans and
other current assets 2 457 1 699
Cash and cash equivalents 1 346 770
Assets classified as held for sale 15
5 185 3 057
Total assets 14 440 10 947
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated share capital 6 969 6 111
Reserves (1 405) (2 163)
5 564 3 948
Non-controlling interests 119 51
Total equity 5 683 3 999
Non-current liabilities
Interest-bearing long-term liabilities 3 800 2 380
Deferred taxation liabilities 723 562
Other long-term liabilities and provisions 101 25
4 624 2 967
Current liabilities
Accounts payable, provisions and other
current liabilities 3 047 1 868
Interest-bearing short-term liabilities 343 726
Bank overdrafts and short-term facilities 743 1 387
4 133 3 981
Total equity and liabilities 14 440 10 947
Net asset value per ordinary share (cents) 238 206
Net interest-bearing debt to equity 64% 94%
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
Year ended Year ended
30 June 2012 30 June 2011
Audited Audited
Rm Rm
Cash generated before working capital
changes 1 627 1 489
Changes in working capital 279 (29)
Increase in inventories (11) (53)
Decrease/(increase) in receivables 176 (88)
Increase in payables 114 112
Cash generated from operations 1 906 1 460
Net interest paid (375) (494)
Dividends paid (4) (11)
Dividends received 1
Taxation paid (68) (57)
Net cash inflow from operating activities 1 460 898
Additions to property, plant and equipment (950) (803)
Proceeds on disposal of property, plant and
equipment 211 86
Additions to intangible assets (26) (14)
Acquisition of subsidiary companies, net
of cash and cash equivalents on hand at
acquisition 43 (31)
Disposal of subsidiaries and businesses,
net of cash disposed - 23
Decrease in investments and loans 125 119
Decrease in short-term loans receivable 19
Other investing activities (20) (1)
Net cash outflow from investing activities (617) (602)
(Decrease)/increase in bank overdrafts and
short-term facilities (950) 517
Increase/(decrease) in long-term interest-
bearing loans and borrowings 611 (662)
Increase/(decrease) in short-term interest-
bearing loans and borrowings 86 (121)
Net cash outflow from financing activities (253) (266)
Net increase in cash and cash equivalents 590 30
Effects of exchange rate changes on cash
and cash equivalents (14) (16)
Cash and cash equivalents at the beginning
of the year 770 756
Cash and cash equivalents at the end of
the year 1 346 770
CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Year ended Year ended
30 June 2012 30 June 2011
Audited Audited
Rm Rm
Balance at the beginning of the year 3 999 3 170
Net shares issued 858
Changes in reserves
Total comprehensive income for the year 574 272
Pre-acquisition effects on reserves (335) (11)
Share-based payments 6 3
Movements on reverse acquisition reserves 524 579
Other reserve movements (11) (21)
Changes in non-controlling interests
Total comprehensive income for the year
attributable to non-controlling interests 22 17
Dividends and capital distributions paid (10)
Acquired on acquisition of subsidiary 46
Balance at the end of the year 5 683 3 999
Comprising:
Ordinary stated share capital 6 969 6 111
Reverse acquisition reserve (3 952) (4 476)
Distributable reserves 2 531 2 292
Share-based payment reserve 49 43
Other reserves (33) (22)
Non-controlling interests 119 51
5 683 3 999
CONDENSED CONSOLIDATED INCOME
STATEMENT Year ended Year ended
30 June 2012 30 June 2011
Audited Audited %
Notes Rm Rm change
Revenue 11 018 8 861 24
Operating profit before
depreciation, amortisation
and capital items 1 738 1 604 8
Depreciation and
amortisation (632) (575)
Operating profit before
capital items 1 106 1 029 7
Capital items 1 81 (157)
Earnings before interest,
dividend income, associate
earnings and taxation 1 187 872 36
Net finance costs (382) (475)
Finance costs (499) (629)
Income from investments 117 154
Share of profit of associate
companies 11 6
Profit before taxation 816 403 102
Taxation (220) (114)
Profit for the year 596 289 106
Attributable to:
Owners of the parent 574 272 111
Non-controlling interests 22 17
Profit for the year 596 289 106
Headline earnings per
ordinary share (cents) 24,2 22,1 10
Fully diluted headline
earnings per ordinary share
(cents) 24,1 22,1 9
Basic earnings per ordinary
share (cents) 28,4 14,2 100
Fully diluted earnings per
ordinary share (cents) 28,2 14,2 99
Number of ordinary shares
in issue (m) 2 337 1 913 22
Weighted average number of
ordinary shares in issue (m) 2 019 1 913 6
Earnings attributable to
ordinary shareholders (Rm) 574 272 111
Headline earnings
attributable to ordinary
shareholders (Rm) 2 490 424 16
SEGMENTAL REPORTING 2012 2011
for the year ended 30 June 2012 Audited Audited
Rm Rm
REVENUE
Manufacturing 1 993 761
Logistics 6 822 6 044
Timber 2 286 2 240
11 101 9 045
Intersegment revenue eliminations (83) (184)
11 018 8 861
OPERATING PROFIT BEFORE CAPITAL
ITEMS
Manufacturing 132 52
Logistics 701 617
Timber 273 360
1 106 1 029
RECONCILIATION BETWEEN OPERATING
PROFIT PER INCOME STATEMENT AND
OPERATING PROFIT BEFORE CAPITAL
ITEMS PER SEGMENTAL ANALYSIS
Operating profit per income statement 1 187 872
Capital items (81) 157
Operating profit before capital items per
segmental analysis 1 106 1 029
TOTAL ASSETS
Manufacturing 3 767 853
Logistics 4 722 4 467
Timber 4 449 4 496
12 938 9 816
RECONCILIATION BETWEEN TOTAL
ASSETS PER STATEMENT OF FINANCIAL
POSITION AND TOTAL ASSETS PER
SEGMENTAL ANALYSIS
Total assets per statement of financial
position 14 440 10 947
Less: Cash and cash equivalents (1 346) (770)
Less: Investments and loans in associate
companies (74) (62)
Less: Investments in joint-venture
companies 2
Less: Interest-bearing loans receivable (9) (126)
Less: Related-party receivables (73) (175)
Total assets per segmental analysis 12 938 9 816
GEOGRAPHICAL ANALYSIS
Revenue
Southern Africa 11 018 8 861
Non-current assets
Southern Africa 9 255 7 890
Basis of segmental presentation
CONDENSED CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Year ended Year ended
30 June 2012 30 June 2011
Audited Audited
Rm Rm
Profit for the year 596 289
Other comprehensive loss (10) (21)
Actuarial gain on defined benefit plans 2 5
Exchange differences on translation of
foreign subsidiaries (11) (27)
Net value gain on cash flow hedges and
other fair value reserves 2
Deferred taxation (1) (1)
Total comprehensive income for the year 586 268
Total comprehensive income
attributable to:
Owners of the parent 564 251
Non-controlling interests 22 17
Total comprehensive income for the year 586 268
ADDITIONAL INFORMATION
Year ended Year ended
30 June 2012 30 June 2011
Audited Audited
Rm Rm
Note 1: Capital items
Profit/(loss) on disposal of property, plant
and equipment 6 (28)
Foreign currency translation reserve
released on disposal of subsidiary 6 2
Negative goodwill 93
Loss on disposal of investments and
associate companies and impairments (24) (131)
81 (157)
Note 2: Headline earnings attributable to
ordinary shareholders
Earnings attributable to owners of the
parent 574 272
Adjusted for:
Capital items (note 1) (81) 157
Taxation effects of capital items (3) (5)
490 424
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance
The consolidated annual financial statements from which these condensed
financial statements have been derived, have been prepared in accordance
with the framework concepts, the measurement and recognition requirements
of International Financial Reporting Standards (IFRS), the AC 500 Standards
as issued by the Accounting Practices Board, the interpretations adopted by
the International Accounting Standards Board (IASB), and the information as
required by IAS 34 Interim Financial Reporting and the requirements of the
Companies Act of South Africa.
2. Basis of preparation
The annual 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 Group's consolidated financial results for the year ended
30 June 2012 was supervised by John Haveman, the Group's Chief Financial
Officer.
KAP's acquisition of the Steinhoff Industrial assets qualifies as a reverse acquisition
under IFRS 3-Business Combinations which has the following implications:
1. Income statement the results for the old KAP assets are included for
three months while the results for the Steinhoff Industrial assets are
included for twelve months. The comparative figures have been restated
to reflect only the Steinhoff Industrial assets' results.
2. Balance sheet the net assets of the old KAP were measured at fair value,
and the Steinhoff Industrial assets remaining at carrying amounts before
the acquisition.
3. Financial statements
The annual 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. Any reference to
future financial information included in the summarised financial information has
not been audited or reviewed. 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 published
consolidated financial statements.
4. Changes in accounting policies
The accounting policies of the Group have been applied consistently to the
periods presented in the consolidated financial statements, except for the
following:
During the current year, the Group has adopted and early adopted all of the
new and revised standards and interpretations issued by the IASB and the IFRIC
that are relevant to its operations and effective for annual reporting periods
beginning on 1 July 2011. The adoption of these new and revised standards and
interpretations has not resulted in material changes to the Group's accounting
policies.
Details of the implementation and adoption of the various IFRSs and IFRICs are
reflected in the published consolidated financial statements.
5. Business combinations
Effective 2 April 2012, KAP International Holdings Ltd acquired 100% of the
Steinhoff Industrial assets. From an accounting point of view, this transaction
qualified as a reverse acquisition under IFRS 3 Business Combinations which
means that the old KAP assets have effectively been acquired by the Steinhoff
Industrial assets.
For further details refer to Annual Financial Statements.
6. Commitments and contingencies
2012 2011
Rm Rm
Capital commitments 218 149
Operating lease commitments 422 415
7. Related party transactions
KAP has entered into various transactions with related parties, all of which are
at arm's length.
8. Post-balance sheet events
No significant events have occurred in the period between the end of the
financial year and the date of this report.
9. Changes to the board
During the financial year, the following changes were made to the board of
directors as previously announced on SENS:
Appointments Date Resignations Date
J de V du Toit (chairman) 24 May 2012 CE Daun 25 June 2012
KJ Grove (CEO) 25 April 2012 PCT Schouten 25 April 2012
*AB la Grange 25 April 2012 KE Schmidt 25 June 2012
SH Muller 25 June 2012 UW Schäckermann 25 June 2012
PK Quarmby 25 June 2012 F Möller 25 June 2012
CJH van Niekerk 25 April 2012
* Resigned from Audit and Risk Committee 31 August 2012.
10. Dividend Timetable
The timetable in respect of the dividend is as follows:
DAY EVENT
Friday, 28 September 2012 Last day to trade
Monday, 1 October 2012 Shares trade ex dividend
Friday, 5 October 2012 Date to be recorded in the register to
receive the dividend
Monday, 8 October 2012 Payment date
In terms of the new Dividends Tax effective 1 April 2012, 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) No STC credits were utilised in determining the net dividend;
(3) The withholding tax, if applicable at the rate of 15%, will result in a net
cash dividend per share of 5,1 cents;
(4) The issued gross ordinary share capital of KAP International
Holdings Ltd is 2 337 254 668 shares at 4 September 2012; and
(5) KAP International Holdings Limited's tax reference number is
9999/509/71/5.
COMMENTARY
CORPORATE ACTIVITY
As announced on 30 March 2012, the acquisition of Unitrans, PG Bison,
Vitafoam, BCM and DesleeMattex (the Steinhoff Industrial Assets) became
effective on 2 April 2012. For accounting purposes the transaction is regarded
as a reverse acquisition. Accordingly, the Steinhoff Industrial Assets are treated
as the acquiror and KAP as the acquiree.
SEGMENTS
MANUFACTURING
The manufacturing division produces a number of key technical products and
iconic brands across key strategic industries in South Africa.
LOGISTICS
Unitrans comprises a specialist supply chain business which designs,
implements and manages supply chains and logistics for a diverse customer
base on a long-term contractual basis across Africa, as well as comprehensive
passenger transport solutions in southern Africa.
TIMBER
PG Bison's operations comprise forestry plantations and various plants which
manufacture and distribute sawn timber, poles, wood-based panel products,
decorative laminates and solid surfacing materials to a diverse customer base
in southern Africa.
OPERATIONAL REVIEW
MANUFACTURING
The automotive division delivered a good performance supported by higher
vehicle volumes, good operational efficiencies and extremely low reject rates.
Hosaf delivered strong results, benefiting from good volumes in carbonated
soft drinks and increased demand for PET.
The footwear group and the food assets continue to deliver good results, while
the textile, furniture and bedding operations are experiencing challenging
trading conditions.
LOGISTICS
Unitrans Supply Chain Solutions
The division delivered another good performance for the year, and revenue
increased due to various new contracts entered into during the year.
Service standards have been maintained at high levels, new contracts have
been secured on good terms, and underlying margins have been favourable,
producing good returns on capital.
Unitrans Passenger
Unitrans Passenger delivered on its targets. Profits and revenues increased
year on year due to contributions from new contracts, particularly in the
mining sector, as well as organic growth at the intercity operations and the
opening of new passenger routes.
TIMBER
PG Bison has experienced weak market conditions which resulted in significant
pressure on margins.
Following a strategic review of the division, a major restructuring of the panel
operation has now been completed with a view to reducing the division's non-
core product offering and its cost structure, and positioning PG Bison to be the
premier flat sheet board manufacturer and upgrader in Africa.
FINANCIAL REVIEW
Impact of the acquisition of the Steinhoff Industrial assets
The acquisition of the Steinhoff Industrial assets effective 2 April 2012, is
classified as a reverse acquisition under IFRS 3 Business Combinations which
has the following implications:
1. Income statement the results for the traditional KAP assets are included
for three months while the results for the Steinhoff Industrial assets are
included for twelve months. The comparative figures have been restated to
reflect only the Steinhoff Industrial assets' businesses.
2. Balance sheet the net assets of the traditional KAP assets were measured
at fair value at the date of the acquisition, and the Steinhoff Industrial
assets remaining at carrying amounts before the acquisition.
Revenue
Revenue increased by 24% to R11 billion with growth experienced across all
divisions.
Operating profit and EBITDA
Operating profit before capital items increased by 7% year on year, while
EBITDA before capital items of R1 738 million increased by 8% year on year.
This increase was due to a strong performance in the logistics division and
improved performance in the manufacturing division. Challenging market
conditions in the construction and timber industries hindered profit growth at
PG Bison, but the restructuring referred to above will restore the ability of the
business to generate profitable growth.
The operating margin came in at 10.0% (2011; 11.6%) which declined as a result
of the margin pressures experienced by PG Bison, as well as the lower margins
of the traditional KAP assets which were included in the results for the first
time. With reference to the Segmental Report:
- operating margins in the Logistics segment improved to 10,3% (2011: 10,2%);
- the Manufacturing segment's margins declined to 6,6% (2011; 6,8%) mainly
due to the lower margins applicable to the traditional KAP included for
three months;
- the Timber Segment's margins declined to 11,9% from 16,1% in the previous
financial year which bears testimony to the challenges that this division
experienced over the year under review.
Net finance costs
Good cash flows over the year have resulted in net finance costs reducing to
R382 million for the year (2011: R475 million). The EBITDA/interest cover ratio
is at a comfortable 4,5 times (2011: 3,4 times).
Taxation
The taxation rate of 27,3% (2011: 28,7%) approximates the South African
statutory rate, which is appropriate given the jurisdictions in which the Group
operates.
Earnings per share (EPS) and headline earnings per share (HEPS)
EPS increased by 100% to 28,4 cents, while HEPS increased by 10% to
24,2 cents. The difference between EPS and HEPS relates mainly to the effects
of the change in capital items from a loss of R 157m in 2011 (largely as a result
of the disposal of investments) to a profit of R 81m in 2012 (largely as a result
of negative goodwill arising from the reverse acquisition of R 93m).
Debt structure
The Group's net debt as at June 2012 of R3 540 million translates into a debt/
equity ratio of 64% of which effectively all is term funding, thus the directors
are of the opinion that a favourable maturity profile is in place. The Company is
committed to repaying a further R175 million of the Steinhoff term loan in the
financial year ahead. From a serviceability perspective, the Group's net debt:
EBITDA ratio stood at a comfortable 2.04 times.
Net asset value
Despite the increase in the number of shares notionally issued in terms of
IFRS 3 of 424.5 million shares, as at 30 June 2012 the net asset value per share
increased by 16% from 206 cents to 238 cents.
Working capital
Despite the inclusion of the traditional KAP net working capital in the balance sheet,
the Group was able to limit the increase in working capital to R358 million.
Cash flow
Cash flow from operations of R1 906 million exceeded operating profit of
R1 106m by 72%, which underscores the Group's quality of earnings and is an
encouraging signal with reference to the Group's growth prospects within
prudent financial covenants and norms.
ANNUAL GENERAL MEETING
The annual general meeting will be held on 14 November 2012.
OUTLOOK
As the Group has now been established as a significant emerging market
industrial player with good positioning in growth markets and industries, a
strong balance sheet and the support of a large controlling shareholder, we
believe that the Group is well positioned to deliver satisfactory returns to
shareholders. We are looking forward to continued growth in the logistics
sector, to capitalising on the benefits from a restructured PG Bison which,
along with competitively positioned manufacturing businesses, should position
the KAP Group for growth.
APPRECIATION
As always, we are grateful to our shareholders, employees and other
stakeholders, and thank them for their continued support.
FINAL DIVIDEND ANNOUNCEMENT
In light of the good cash flows for the year, the board has declared a final
dividend of 6 cents per share from income reserves, for the period ended 30
June 2012.
Signed on behalf of the Board.
J de V du Toit Jo Grové
Non-executive chairman Chief executive officer
4 September 2012
KAP International Holdings Ltd
("KAP" or "the Company" or "the Group")
Non-executive directors: J de V du Toit (Chairman), M J Jooste, A B la Grange,
J B Magwaza, I N Mkhari, S H Muller, S H Nomvete, P K Quarmby, D M van der
Merwe, C J H van Niekerk
Executive directors: K J Grové (CEO), J P Haveman (CFO)
Registration number: 1978/000181/06
JSE share code: KAP
ISIN: ZAE000059564
Registered address: 28 6th Street, Wynberg, Sandton, 2090
Postal address: PO Box 18, Stellenboch, 7599
Telephone: 021 808 0900 Facsimile: 021 808 0901
Transfer secretaries: Computershare Investor Services (Proprietary) Limited,
70 Marshall Street, Johannesburg, 2001
Company secretary: Steinhoff Africa Secretarial Services (Pty) Limited
Auditors: Deloitte & Touche
Sponsor: PSG Capital (Proprietary) Limited
Date: 04/09/2012 10:42:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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