Wrap Text
Unaudited Results for the six months ended 31 December 2012
KAP Industrial Holdings Limited
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000059564
("KAP" or "the company" or "the group")
Unaudited Results
for the six months ended 31 December 2012
* Complementary business units and African growth deliver revenue and margin improvement.
* HEPS increases by 21% to 14,4 cents per share (1H12: 11,9 cents per share)
* Reconstituted business improves cash flow performance
* Operating profit before capital items increases to R673 million (1H12: R510 million)
* Cash generated from operations increases to R646 million (1H12: R346 million)
COMMENTARY
SEGMENTS
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 in selected
African countries. In addition, this segment includes the Unitrans
passenger division which provides transport to the public, tourist
and personnel market segments throughout southern Africa.
INTEGRATED TIMBER
PG Bison's operations comprise forestry plantations and various
manufacturing and upgrading plants which manufacture and
distribute sawn timber, poles, wood-based panel products,
decorative laminates, resin and solid surfacing materials to a diverse
customer base in southern Africa.
MANUFACTURING
The manufacturing division produces a number of key industrial
products such as polyethylene terephthalate (PET/resin), and
industrial foam products used in the automotive and furniture
industries. In addition, this segment includes the manufacturing
operations of both the food and industrial footwear divisions.
OPERATIONAL REVIEW
LOGISTICS
Unitrans Supply Chain Solutions
The supply chain operations of Unitrans reported a solid set of
results, supported by good growth in the higher margin African
operations. An improved mix in the southern African business
led to partial recovery of margins given the reduced volumes and
increased costs resulting from the road freight industry strike.
Unitrans Passenger
The passenger division reported good growth supported by a growing
Intercity/Commuter market segment. The growth in this segment was
fuelled by increased traffic on the African intercity routes. In addition, our
strategy to expand our service offering and customer base in geographical
areas where we are already in operation further reduced overheads and
increased margin on the contractual side of our business.
INTEGRATED TIMBER
PG Bison produced an improved set of results for the period, following
a major restructuring of the Panel Products division. The
restructure resulted in healthy cash generation, improved trading
margins and lower overheads. In addition, the company's forestry,
sawmilling, pole and resin divisions continued to perform well.
Market conditions remained stable for the period in both
Panel Products and Timber. The company was able to
increase volumes and sales in a period where imports into
South Africa decreased and competitors exited the market.
PG Bison remains focused on optimising its product management, marketing
and sales execution activities, and on driving the efficiencies of its
integrated model.
MANUFACTURING
The manufacturing division increased revenues by 8% and increased
operating profit by 15% on a comparable basis. This increase was led by market
share gains and industry growth in KAP's two largest manufacturing divisions,
Hosaf (PET) and Feltex (Automotive). In addition, the food and
footwear manufacturing divisions increased profitability, while,
despite strong revenue growth, the furniture and bedding division
was unable to maintain margins.
FINANCIAL REVIEW
Impact of the acquisition of the Steinhoff Industrial assets
The acquisition of the Steinhoff Industrial assets effective
2 April 2012, classified as a reverse acquisition under IFRS 3 Business
Combinations, impacts the comparability of the December 2012
results versus those of the prior year as follows:
1. Income statement: The results for the combined group are
included for the six months to December 2012. The comparative
figures reflect only the results of the Steinhoff Industrial
assets. The only segment that is affected by this is that of the
manufacturing division.
2. Statement of financial position: All assets and liabilities for the
combined group are included as at 31 December 2012. The
comparative figures reflect only the assets and liabilities of the
Steinhoff Industrial assets as at 31 December 2011.
In order to support a real comparison on the figures, the table
below highlights the indicative comparative:
KAP as
reported Com- %
1H13 1H12 1H12 parable change
Revenue
unaudited
Logistics 3 671 3 590 3 590 2
Integrated Timber 1 177 1 140 1 140 3
Manufacturing 3 115 426 2 449 2 875 8
7 963 5 156 2 449 7 605 5
Intersegment
revenue
elimination (62) (58) (58)
7 901 5 098 2 449 7 547 5
Operating profit
before capital
items unaudited
Logistics 354 332 332 7
Integrated Timber 154 145 145 6
Manufacturing 165 33 110 143 15
673 510 110 620 9
Revenue
As set out in the table above organic revenue growth amounted
to an increase of 5% while reported revenue increased by 55% to
R7 901 million compared to the prior period. From an operational point
of view, the growth is pleasing when viewed against the backdrop of
the three-week road freight industry strike, and various restructuring
initiatives to facilitate our exit from low-margin business. As a result,
profitability and margins increased.
Operating profit
The operating profit margin of the combined business increased
from 8,2% to 8,5%, while operating profit on a comparable basis
increased by 9% to R673 million. The margin improvement in
the logistics division was supported by strong growth from the
passenger division. The timber division increased margins to
13,1% (1H12: 12,7%) and this improvement reflects the positive effects
of the restructuring of the business. The manufacturing division's
margin of 5,3% (1H12: 5,0%) was due to a good performance in the
two largest divisions, Hosaf (PET) and Feltex (Automotive).
Cash flow
The marked improvement in the working capital investment and
cash flow generation of the combined group during its peak trading
period is particularly encouraging.
Cash generated from operations now represents 96% of operating
profit before capital items (vs 68% in the comparative period),
mainly as a result of the improvement in the working capital
investment by R346 million (1H12: R436 million). In addition, despite
the increased investment in expansionary capital expenditure
of R277 million (1H12: R146 million) and the increased dividend
payment of R154 million (1H12: R13 million), the group is well
positioned to continue to generate strong cashflows for the
remainder of the year.
Debt structure and finance costs
The group's net debt of R3 820 million (1H12: R3 953 million)
translates into a debt/equity ratio of 66% (1H12: 93%). The
majority of the debt is represented by a shareholder loan with
predetermined maturity dates which supports the capitalisation
of the group in the medium to long term.
Management remains confident that the serviceability of the debt
is well under control as is evidenced by the net finance costs of
R189 million (1H12: R188 million), but more importantly the improved
EBITDA/interest cover ratio at 5,6 times (1H12: 4,4 times).
Earnings per share (EPS) and headline earnings per share (HEPS)
Despite the dilutionary effect of the new shares issued in respect
of the traditional KAP assets, fully diluted EPS increased by 31% to
15,6 cents and fully diluted HEPS increased by 20% to 14,2 cents.
The difference between EPS and HEPS relates mainly to the effects
of profits on disposal of property, plant and equipment.
Net asset value
Despite the dilutionary effect of the new shares issued in respect of
the traditional KAP assets, the net asset value per share increased
by 11% from 223 cents to 248 cents.
OUTLOOK
With a more stable labour environment expected given the three-
year agreement reached in October last year, the logistics division
expects improved operating performance in the second six months
of this financial year. In addition, our African growth plan has gained
momentum and the growing geographical diversity has already
started to benefit Unitrans.
The successful turnaround experienced at PG Bison is encouraging for the
timber division and bodes well for profitable growth in an improved market.
In line with the company's objective of being the premier flat board manufacturer
and primary upgrader in Africa, PG Bison commissioned a new melamine-faced board
press at its Boksburg operation, and is at an advanced stage in the installation
of a new SupaWood (medium-density fibreboard) plant, also at its Boksburg operation.
This is expected to be commissioned in September 2013.
The manufacturing division is now well positioned to deliver on its long-term
strategic plans, and the recent weakening of the Rand and government's increased
focus on job creation continues to provide opportunities for local manufacturers.
APPRECIATION
This is the first full period of published results as a combined group.
The six months under review has been an exciting time for the
group and we are pleased to report that the implementation and
consolidation of our business was seamless. We are now operating
as one group, determined to maximise our returns on invested
capital and to continue to gain market share in the industries that
we have identified as key to our sustainable growth strategy. We
would like to extend our sincere gratitude to all our employees,
shareholders, customers and suppliers for the support they have
given us during this transformational time in KAP's history.
INTERIM DIVIDEND
In line with historical policy, the group has not declared an interim
dividend.
Signed on behalf of the board.
J de V du Toit Jo Grové
Non-executive chairman Chief executive officer
18 February 2013
CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Intangible assets and goodwill 1 332 1 229 1 311
Property, plant and equipment,
investment properties 6 286 5 039 6 129
Biological assets 1 706 1 587 1 656
Investments and loans 125 84 83
Deferred taxation assets 66 100 76
9 515 8 039 9 255
Current assets
Inventories 1 452 673 1 367
Accounts receivable, short-term loans
and other current assets 2 646 1 730 2 457
Cash and cash equivalents 1 097 435 1 346
Assets classified as held for sale 15
5 195 2 838 5 185
Total assets 14 710 10 877 14 440
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated share capital 6 970 6 111 6 969
Reserves (1 157) (1 853) (1 405)
5 813 4 258 5 564
Non-controlling interests 120 60 119
Total equity 5 933 4 318 5 683
Non-current liabilities
Interest-bearing long-term liabilities 3 893 2 220 3 800
Deferred taxation liabilities 770 648 723
Other long-term liabilities and provisions 60 23 101
4 723 2 891 4 624
Current liabilities
Accounts payable, provisions and
other current liabilities 3 030 1 500 3 047
Interest-bearing short-term liabilities 291 37 343
Bank overdrafts and short-term facilities 733 2 131 743
4 054 3 668 4 133
Total equity and liabilities 14 710 10 877 14 440
Net asset value per ordinary share (cents) 248 223 238
Net gearing ratio (%) 66% 93% 64%
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Cash generated before working
capital changes 992 782 1 627
Changes in working capital (346) (436) 279
Increase in inventories (85) (76) (11)
(Increase)/decrease in receivables (183) (29) 176
(Decrease)/increase in payables (78) (331) 114
Cash generated from operations 646 346 1 906
Net interest paid (189) (178) (375)
Dividends paid (154) (13) (4)
Dividends received 1 1
Taxation paid (67) (33) (68)
Net cash inflow from operating activities 236 123 1 460
Additions to property, plant and
equipment expansion (277) (146) (419)
Additions to property, plant and
equipment replacement, net of proceeds
and government grants received (194) (203) (320)
Other investing activities (45) 17 122
Net cash outflow from investing
activities (516) (332) (617)
(Decrease)/increase in bank overdrafts
and short-term facilities (10) 738 (950)
Increase/(decrease) in interest-bearing
loans and borrowings 41 (885) 697
Shares issued 2
Net cash inflow/(outflow) from
financing activities 33 (147) (253)
Net (decrease)/increase in cash
and cash equivalents (247) (356) 590
Effects of exchange rate changes
on cash and cash equivalents (2) 21 (14)
Cash and cash equivalents at the
beginning of the period 1 346 770 770
Cash and cash equivalents at the end
of the period 1 097 435 1 346
ADDITIONAL INFORMATION
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Note 1: Capital items
Profit on disposal of property, plant
and equipment 35 1 6
Foreign currency translation reserve
released on disposal of subsidiary 6
Negative goodwill 93
Profit on disposal of investments and
associate companies and impairments 8 (24)
43 1 81
Note 2: Headline earnings
attributable to ordinary shareholders
Earnings attributable to owners of the
parent 370 230 574
Adjusted for:
Capital items (note 1) (43) (1) (81)
Taxation effects of capital items 10 (3)
337 229 490
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 385 239 596
Other comprehensive (loss)/income (4) 42 (10)
Actuarial gain on defined benefit plans 2
Exchange differences on translation
of foreign subsidiaries (4) 42 (11)
Deferred taxation (1)
Total comprehensive income for the
period 381 281 586
Total comprehensive income
attributable to:
Owners of the parent 366 272 564
Non-controlling interests 15 9 22
Total comprehensive income for
the period 381 281 586
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited % Audited
Notes Rm Rm change Rm
Revenue 7 901 5 098 55 11 018
Operating profit before
depreciation, amortisation
and capital items 1 055 821 29 1 738
Depreciation and
amortisation (382) (311) (632)
Operating profit before
capital items 673 510 32 1 106
Capital items 1 43 1 81
Earnings before interest,
dividend income, associate
earnings and taxation 716 511 40 1 187
Net finance costs (189) (188) (382)
Finance costs (264) (263) (499)
Income from investments 75 75 117
Share of profit of associate
companies 3 6 11
Profit before taxation 530 329 61 816
Taxation (145) (90) (220)
Profit for the period 385 239 61 596
Attributable to:
Owners of the parent 370 230 61 574
Non-controlling interests 15 9 22
Profit for the period 385 239 61 596
Headline earnings per
ordinary share (cents) 14,4 11,9 21 24,2
Fully diluted headline
earnings per ordinary
share (cents) 14,2 11,8 20 24,1
Basic earnings per
ordinary share (cents) 15,8 12,0 32 28,4
Fully diluted earnings per
ordinary share (cents) 15,6 11,9 31 28,2
Number of ordinary
shares in issue (m) 2 346 1 913 23 2 337
Weighted average number of
ordinary shares in issue (m) 2 338 1 913 22 2 019
Earnings attributable to
ordinary shareholders (Rm) 370 230 61 574
Headline earnings
attributable to ordinary
shareholders (Rm) 2 337 229 47 490
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Balance at the beginning of the period 5 683 3 999 3 999
Changes in stated share capital
Net shares issued 2
Reverse acquisition adjustment: pre-
reverse acquisition share capital of legal
parent 858
Changes in reserves
Total comprehensive income for the
period attributable to owners of the
parent 366 272 564
Dividends paid (141) (17) (335)
Share-based payments 30 26 6
Reverse acquisition adjustment:
movement in share capital of acquirer 24 24
Reverse acquisition adjustment:
elimination of pre-acquisition reserves
of legal parent 500
Other reserve movements (8) 5 (1)
Changes in non-controlling interests
Total comprehensive income for the
period attributable to non-controlling
interests 15 9 22
Dividends and capital distributions
paid (14)
Acquired on acquisition of subsidiary 46
Balance at the end of the period 5 933 4 318 5 683
Comprising:
Ordinary stated share capital 6 970 6 111 6 969
Reverse acquisition reserve (3 952) (4 452) (3 952)
Distributable reserves 2 760 2 510 2 531
Share-based payment reserve 86 69 49
Other reserves (51) 20 (33)
Non-controlling interests 120 60 119
5 933 4 318 5 683
SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited % Audited
Rm Rm change Rm
Revenue
Logistics 3 671 3 590 2 6 822
Integrated Timber 1 177 1 140 3 2 286
Manufacturing 3 115 426 631 1 993
7 963 5 156 54 11 101
Intersegment revenue
eliminations (62) (58) (83)
7 901 5 098 55 11 018
Operating profit before
capital items
Logistics 354 332 7 701
Integrated Timber 154 145 6 273
Manufacturing 165 33 400 132
673 510 32 1 106
Reconciliation between
operating profit per income
statement and operating
profit before capital items
per segmental analysis
Operating profit per
income statement 716 511 1 187
Capital items (43) (1) (81)
Operating profit before capital
items per segmental analysis 673 510 1 106
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Total assets
Logistics 5 062 4 792 4 722
Integrated Timber 4 536 4 827 4 449
Manufacturing 3 824 738 3 767
13 422 10 357 12 938
Reconciliation between total assets per
statement of financial position and total
assets per segmental analysis
Total assets per statement of financial
position 14 710 10 877 14 440
Less: Cash and cash equivalents (1 097) (435) (1 346)
Less: Investments and loans in associate
companies (87) (73) (74)
Less: Interest-bearing loans receivable (30) (10) (9)
Less: Related party receivables (74) (2) (73)
Total assets per segmental analysis 13 422 10 357 12 938
Six months Six months Year
GEOGRAPHICAL INFORMATION ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Revenue
Southern Africa 7 901 5 098 11 018
31 Dec 31 Dec 30 June
NON-CURRENT ASSETS 2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Non-current assets
Southern Africa 9 515 8 039 9 255
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance
These condensed financial statements 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,
as amended.
2. Basis of preparation
The condensed 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 condensed consolidated financial results
for the six months ended 31 December 2012 was supervised by John
Haveman, the group's chief financial officer.
KAP's acquisition on 2 April 2012 of the Steinhoff Industrial assets qualifies
as a reverse acquisition under IFRS 3 Business Combinations, which has the
following implications for these results:
1. Income statement: The results for all assets are included for the
six months to December 2012. The comparative figures have been
restated to reflect only the Steinhoff Industrial assets' results.
2. Balance sheet: All assets and liabilities are included as at
December 2012. The comparative figures have been restated to
reflect only the Steinhoff Industrial assets.
3. 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
18 February 2013.
4. Changes in accounting policies
The accounting policies of the group have been applied consistently to
the periods presented in the consolidated financial statements.
5. Related party transactions
KAP has entered into various transactions with related parties, all of
which are at arm's length.
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
There were no changes to the board of directors other than previously
announced on SENS.
Non-executive directors: J de V du Toit (Chairman), M J Jooste, A B la Grange,
J B Magwaza, I N Mkhari, S H Müller, 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)
KAP Industrial Holdings Limited
("KAP" or "the company" or "the group")
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000059564
Registered address: 28 6th Street, Wynberg, Sandton, 2090
Postal address: PO Box 18, Stellenbosch, 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 (Proprietary) Limited
Auditors: Deloitte & Touche
Sponsor: PSG Capital (Proprietary) Limited
www.kap.co.za
Date: 18/02/2013 02:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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