Wrap Text
Unaudited results for the six months ended 31 December 2013
KAP Industrial Holdings Limited
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000171963
("KAP" or "the company" or "the group")
KAP INDUSTRIAL HOLDINGS LIMITED
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
Financial review
Revenue
Revenue from continuing operations increased by 9% to R7 832 million (1H13: R7 208
million) due to growth across all major divisions.
Operating profit before capital items
The group operating profit from continuing operations of R710 million increased from
R650 million in the comparative period due to a good operational performance.
- The Logistics division’s operating profit increased to R392 million from R354 million
due to an 11% growth in revenue, with margins remaining constant at 10%.
- The Integrated Timber division improved its operating profit to R172 million from R154 million
primarily through a margin improvement of 1%, and through cost savings resulting from its
recent restructure.
- The Manufacturing division’s operating profit increased to R146 million from R142 million,
with a good performance by the PET division limiting the impact of lower vehicle build in
the automotive division.
Cash flow
Cash generated before working capital changes increased from R989 million to
R1 070 million, which constitutes 151% of operating profit before capital items and 97%
of EBITDA for the period.
Consistent with previous interim periods, the first half of the financial year saw a seasonal
investment in working capital.
Debt structure and finance costs
The group’s net interest-bearing debt of R3 404 million (1H13: R3 832 million) equates to a
gearing ratio of 54% (1H13: 66%), of which the group’s controlling shareholder (Steinhoff)
accounts for R1 840 million (1H13: R3 494 million). The group is investigating the potential
benefits of replacing the remaining Steinhoff shareholder’s loan with external debt.
Management remains confident of the serviceability of the debt as indicated by the
improving EBITDA/interest cover ratio at 6.3 times (1H13: 5.5 times).
Headline earnings per share (HEPS) and earnings per share (EPS)
HEPS from continuing operations increased by 16% to 16.0 cents from 13.8 cents in the
comparative period. The disposal of non-core assets (disclosed
as capital items) led to the EPS decreasing by 1% to 15.1 cents from 15.2 cents.
Net asset value (NAV)
The NAV per share increased by 9% to 271 cents from 248 cents in the comparable period.
Corporate action
The Bull Brand Foods and Brenner Mills sale transactions were completed during the period.
Strategic update
KAP’s strategy is to be an emerging African market industrial group focused on being market
leaders in the industries we serve, with high barriers to entry, sustainable earnings, solid
margins, strong cash flow generation and African growth.
In line with this strategy, the group has made good progress in the last 6 months, and has:
- disposed of various non-core assets which were generating low returns e.g. the food assets,
- invested in new manufacturing capacity at PG Bison which will generate higher returns, and
- continued to allocate capital to existing logistics partnerships with our customers.
High return investments remain core to the group and we continue to investigate a number
of options for organic growth.
We remain confident that our investment in technology and the group’s focus on its core
competitive advantages will continue to increase market share and enhance returns.
Outlook
Economic conditions in South Africa remain subdued.
Under these circumstances, management has increased its focus on controllable factors
such as costs, productivity and the retention and growth of market share.
Both the Supply Chain Solutions and Passenger divisions maintain ongoing focus on growth
in developing African markets. The restructuring of the USCS business has been favourably
received by its customer base, and is expected to continue to deliver efficiencies.
In the Integrated Timber division, the new Medium Density Fibreboard plant and
restructured cost base is expected to further improve results in the second half of the
financial year.
In the Manufacturing division, Hosaf is expected to continue to benefit from growth in
the PET industry, and Feltex is expected to recover lost vehicle build by the end of the
financial year. The three-year wage agreement in the automotive sector is expected to
have a positive effect on stability in the industry.
Appreciation
KAP is now a well-established diversified emerging market industrial group. We remain
grateful to our employees, shareholders, customers and suppliers for their continued support.
Interim dividend
In line with historical policy, the group has not declared an interim dividend.
On behalf of the Board.
J de V du Toit KJ Grové
Independent non-executive Chairman Chief Executive Officer
17 February 2014
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,
JB Magwaza*, IN Mkhari*, SH Müller*, SH Nomvete*, PK Quarmby*,
DM van der Merwe, CJH van Niekerk
Executive directors: KJ Grové (CEO), JP Haveman (CFO)
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
www.kap.co.za
HEADLINE EARNINGS PER SHARE
FROM CONTINUING OPERATIONS
up by 16% TO 16.0 CENTS
(1H13: 13.8 CENTS)
CASH GENERATED
BEFORE WORKING
CAPITAL OF
R1 070 MILLION
NET
INTEREST-BEARING DEBT
reduced by R428 MILLION
SINCE 1H13
LOGISTICS
Unitrans comprises a specialist supply chain business
which designs, implements and manages supply
chains and logistics for a wide range of customers
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/or 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, vehicle components,
footwear, and furniture and bedding-related
products.
INDUSTRY IN MOTION(TM)
Operational review
LOGISTICS
Unitrans Supply Chain Solutions (USCS)
The restructuring of the USCS division has largely been completed, with the structure
now comprising two divisions rather than three. Substantial costs have been taken out
of the operations.
- The Fuel, Agriculture and Mining division delivered a good performance for the six
months, with African operations and the Fuel division again contributing to growth.
- The Freight and Logistics division experienced difficult trading conditions due to
pressure on its South African customer base.
Unitrans Passenger
The Passenger division continued to deliver good returns and cash flows despite
increases in the fuel price.
- The commuter operations continue to deliver good results, and management is focused
on diversifying its customer base.
- The tourism division continues to deliver acceptable returns, as the tourism market
is showing signs of recovery, due partially to the weakness of the currency.
- Intercity operations experienced a competitive environment, and the South African
consumer remains under pressure.
- The Gautrain feeder and distribution services continued to produce results and
growth in line with expectations and again exceeded required service levels.
INTEGRATED TIMBER
The new Medium Density Fibreboard plant was commissioned during the period, and is
producing significantly improved quality board at improved margins.
In view of subdued market conditions, the division focused on cost containment, margin
improvement and on exploring new markets to facilitate running its integrated value
chain at capacity.
MANUFACTURING
The PET resin manufacturing operation (Hosaf) delivered another pleasing performance
on the back of growing demand.
The Automotive components operation (Feltex) lost volumes due to lower vehicle build.
The Furniture and Bedding division showed a strong turnaround, but the smaller divisions
continue to experience a difficult trading environment, with consumers experiencing
significant pressure.
Financial statements
CONDENSED CONSOLIDATED Six months Six months Year
INCOME STATEMENT ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) % Audited(*)
Notes Rm Rm change Rm
Revenue(1) 7 832 7 208 9 14 320
Operating profit before depreciation,
amortisation and capital items 1 097 1 026 7 2 075
Depreciation and amortisation (387) (376) (751)
Operating profit before capital items 710 650 9 1 324
Capital items 1 (30) 42 20
Earnings before interest, dividend income,
associate and joint venture earnings and
taxation 680 692 (2) 1 344
Net finance charges (174) (187) (368)
Share of profit of associate and
joint-venture companies 4 5 14
Profit before taxation 510 510 – 990
Taxation (141) (139) (273)
Profit for the period from continuing operations 369 371 (1) 717
Profit/(loss) for the period from discontinued
operations 2 1 14 (6)
Profit for the period 370 385 (4) 711
Attributable to:
Owners of the parent 354 370 (4) 677
Non-controlling interests 16 15 34
Profit for the period 370 385 (4) 711
From continuing and discontinued operations:
Headline earnings per ordinary share (cents) 16.1 14.4 12 29.1
Fully diluted headline earnings per ordinary
share (cents) 16.0 14.2 13 29.0
Basic earnings per ordinary share (cents) 15.1 15.8 (4) 28.9
Fully diluted earnings per ordinary share (cents) 15.0 15.6 (4) 28.8
From continuing operations:
Headline earnings per ordinary share (cents) 16.0 13.8 16 28.5
Fully diluted headline earnings per ordinary
share (cents) 15.9 13.7 16 28.4
Basic earnings per ordinary share (cents) 15.1 15.2 (1) 29.2
Fully diluted earnings per ordinary share (cents) 15.0 15.0 – 29.1
Number of ordinary shares in issue (m) 2 346 2 346 – 2 346
Weighted average number of ordinary shares
in issue (m) 2 346 2 338 – 2 342
Earnings attributable to ordinary shareholders (Rm) 354 370 (4) 677
Headline earnings attributable to ordinary
shareholders (Rm) 3 377 337 12 682
(1) A realloaction of R136 million was done in December 2012 between revenue and cost of sales in the Logistics
segment to bring prior year disclosure in line with current year disclosure.
ADDITIONAL INFORMATION Six months Six months Year
ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited Audited
Rm Rm Rm
Note 1: Capital items
From continuing operations:
(Loss)/profit on disposal of property, plant and equipment and
investment property (18) 34 49
(Loss)/profit on disposal of investments and impairments (12) 8 (29)
(30) 42 20
From discontinued operations:
Profit on disposal of property, plant and equipment and investment
property – 1 1
Loss on disposal of investments and impairments (3) – (25)
(3) 1 (24)
(33) 43 (4)
Note 2: Profit for the period from discontinued operations
Revenue 218 538 1 026
Operating profit before depreciation, amortisation and capital items 2 26 27
Depreciation and amortisation – (5) (6)
Operating profit before capital items 2 21 21
Capital items (3) 1 (24)
Earnings before interest, dividend income, associate and joint venture earnings and
taxation (1) 22 (3)
Net finance charges – (2) (3)
(Loss)/profit before taxation (1) 20 (6)
Taxation 2 (6) –
Profit/(loss) for the period from discontinued operations 1 14 (6)
Note 3: Headline earnings attributable to ordinary shareholders
Earnings attributable to owners of the parent 354 370 677
Adjusted for:
Capital items (note 1) 33 (43) 4
Taxation effects of capital items (10) 10 1
377 337 682
CONDENSED CONSOLIDATED Six months Six months Year
STATEMENT OF ended ended ended
COMPREHENSIVE INCOME 31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Profit for the period 370 385 711
Other comprehensive income/(loss)
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries (3) (4) 62
Other comprehensive (loss)/income for the period (3) (4) 62
Total comprehensive income for the period 367 381 773
Total comprehensive income attributable to:
Owners of the parent 352 366 739
Non-controlling interests 15 15 34
Total comprehensive income for the period 367 381 773
CONDENSED CONSOLIDATED Six months Six months Year
STATEMENT OF CHANGES IN EQUITY ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Balance at the beginning of the period 6 301 5 683 5 683
Changes in ordinary stated share capital
Net shares issued – 2 1
Changes in reserves
Total comprehensive income for the period attributable to owners
of the parent 352 366 739
Dividends and capital distributions paid (188) (141) (156)
Share-based payments 25 30 (25)
Other reserve movements – (8) 43
Changes in non-controlling interests
Total comprehensive income for the period attributable to non-
controlling interests 15 15 34
Dividends and capital distributions paid (8) (14) (18)
Balance at the end of the period 6 497 5 933 6 301
Comprising:
Ordinary stated share capital 6 970 6 970 6 970
Reverse acquisition reserve (3 952) (3 952) (3 952)
Distributable reserves 3 269 2 760 3 105
Share-based payment reserve 49 86 24
Other reserves 19 (51) 19
Non-controlling interests 142 120 135
6 497 5 933 6 301
SUMMARISED CONSOLIDATED 31 Dec 2013 31 Dec 2012 30 June 2013
STATEMENT OF FINANCIAL POSITION Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
ASSETS
Non-current assets
Goodwill and intangible assets 1 302 1 332 1 311
Property, plant and equipment, investment properties 6 496 6 269 6 394
Consumable biological assets 1 811 1 706 1 761
Investments in associate and joint-venture companies 146 114 138
Investments and loans 33 30 25
Deferred taxation assets 66 66 68
9 854 9 517 9 697
Current assets
Inventories 1 490 1 443 1 382
Accounts receivable, short-term loans and other current assets 2 593 2 642 2 370
Cash and cash equivalents 1 296 1 084 1 320
Assets classified as held for sale – – 351
5 379 5 169 5 423
Total assets 15 233 14 686 15 120
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated share capital 6 970 6 970 6 970
Reserves (615) (1 157) (804)
6 355 5 813 6 166
Non-controlling interests 142 120 135
Total equity 6 497 5 933 6 301
Non-current liabilities
Interest-bearing long-term liabilities – external 913 618 948
Interest-bearing long-term liabilities – shareholder 1 494 3 275 2 971
Deferred taxation liabilities 923 769 852
Other long-term liabilities and provisions 70 53 77
3 400 4 715 4 848
Current liabilities
Accounts payable, provisions and other current liabilities 3 043 3 015 3 413
Interest-bearing short-term liabilities, bank overdrafts and short-
term facilities – external 1 947 804 221
Interest-bearing short-term liabilities and short-term facilities –
shareholder 346 219 270
Liabilities classified as held for sale – – 67
5 336 4 038 3 971
Total equity and liabilities 15 233 14 686 15 120
Net asset value per ordinary share (cents) 271 248 263
Net interest-bearing debt to equity (%) 54% 66% 50%
CONDENSED CONSOLIDATED Six months Six months Year
STATEMENT OF CASH FLOWS ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Cash generated before working capital changes 1 070 989 2 021
Increase in inventories (113) (84) (137)
Increase in receivables (209) (177) (62)
(Decrease)/increase in payables (380) (83) 427
Changes in working capital (702) (344) 228
Cash generated from operations 368 645 2 249
Dividends paid (196) (154) (158)
Net finance costs (174) (189) (372)
Taxation paid (61) (67) (132)
Net cash (outflow)/inflow from operating activities (63) 235 1 587
Additions to property, plant and equipment - expansion (197) (277) (599)
Additions to property, plant and equipment - replacement, net of
proceeds and government grants received (316) (194) (448)
Other investing activities 256 (42) (114)
Net cash outflow from investing activities (257) (513) (1 161)
Net cash inflow/(outflow) from financing activities 294 34 (476)
Net decrease in cash and cash equivalents (26) (244) (50)
Effects of exchange rate changes on cash and cash equivalents 2 (2) 40
Cash and cash equivalents at the beginning of the period 1 320 1 330 1 330
Cash and cash equivalents at the end of the period 1 296 1 084 1 320
FAIR VALUES OF Fair value Fair value Fair value Fair
as at as at as at value
FINANCIAL INSTRUMENTS 31 Dec 2013 31 Dec 2012 30 June 2013 hierarchy
Rm Rm Rm
Derivative financial assets 33 4 52 Level 2
Derivative financial liabilities – (1) – 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.
SEGMENTAL ANALYSIS Six months Six months Year
ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) % Audited(*)
Rm Rm change Rm
Revenue from continuing operations
Logistics(1) 3 916 3 535 11 7 042
Integrated Timber 1 231 1 177 5 2 392
Manufacturing 2 799 2 558 9 5 036
7 946 7 270 9 14 470
Inter-segment revenue eliminations (114) (62) (150)
7 832 7 208 9 14 320
Operating profit before capital items from
continuing operations
Logistics 392 354 11 686
Integrated Timber 172 154 12 347
Manufacturing 146 142 3 291
710 650 9 1 324
(1) A realloaction of R136 million was done in December 2012 between revenue and cost of sales in the Logistics
segment to bring prior year disclosure in line with current year disclosure.
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) Audited(*)
Rm % Rm % Rm %
Total assets
Logistics 5 347 39 5 062 38 5 139 38
Integrated Timber 4 993 36 4 536 34 4 912 36
Manufacturing 3 364 25 3 789 28 3 504 26
13 704 100 13 387 100 13 555 100
RECONCILIATION OF TOTAL ASSETS
PER STATEMENT OF FINANCIAL
POSITION TO TOTAL ASSETS PER 31 Dec 2013 31 Dec 2012 30 June 2013
SEGMENTAL ANALYSIS Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Total assets per statement of financial position 15 233 14 686 15 120
Less: Cash and cash equivalents (1 296) (1 084) (1 320)
Less: Investments in associate and joint-venture companies (146) (114) (138)
Less: Interest-bearing long-term loans receivable (33) (30) (30)
Less: Interest-bearing short-term loans receivable (5) – –
Less: Related party receivables (49) (71) (77)
Total assets per segmental analysis 13 704 13 387 13 555
GEOGRAPHICAL INFORMATION Six months Six months Year
ended ended ended
31 Dec 2012 31 Dec 2012 30 June 2013
Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Revenue
Southern Africa 7 832 7 208 14 320
31 Dec 2013 31 Dec2012 30 June2013
Unaudited Unaudited(*) Audited(*)
Rm Rm Rm
Non-current assets
Southern Africa 9 854 9 517 9 697
(*) Prior period disclosure has been restated to account for the adoption of new and revised accounting standards as
well as re-presented to reflect discontinued operations.
NOTES TO THE FINANCIAL STATEMENTS
1. Statement of compliance
These condensed interim financial statements have been prepared in
accordance with the framework concepts, 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 71
of 2008 as amended.
2. Basis of preparation
The condensed interim 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 2013 was supervised by John
Haveman, the group’s chief financial officer.
3. Changes to comparative numbers
Prior period (December 2012 and June 2013) disclosure has been restated to
account for the adoption of new and revised accounting standards, in particular
the required equity accounting of joint ventures. In addition, the December
2012 income statement was re-presented to reflect the discontinued Food
operations, which were disposed of during the current period.
4. 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 17 February 2014.
5. Changes in accounting policies
The accounting policies adopted in the preparation of the condensed interim
financial information are consistent with those of the annual financial
statements for the year ended 30 June 2013, except for the adoption of the
following standards during the period:
IFRS 10 - Consolidated Financial Statements,
IFRS 11 - Joint Arrangements,
IFRS 12 - Disclosure of Interests in Other Entities,
IFRS 13 - Fair Value Measurement,
IAS 19 (revised) - Employee Benefits
IAS 27 - Consolidated and Separate Financial Statements,
IAS 28 - Investment in Associates and Joint Ventures,
Only IFRS 11 and IAS 28 had an effect on the group’s results and required
the restatement of prior periods, but the restatement is immaterial and
therefore no separate disclosure of the restatement is required.
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 during the period
under review.
www.kap.co.za
Date: 17/02/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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