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KAP INDUSTRIAL HOLDINGS LIMITED - Unaudited Results For The Six Months Ended 31 December 2015

Release Date: 15/02/2016 14:00
Code(s): KAP     PDF:  
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Unaudited Results For The Six Months Ended 31 December 2015

KAP Industrial Holdings Limited
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000171963
("KAP" or "the company" or "the group")

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2015

Revenue
from continuing
operations
up by 3% to R8.2bn

Operating
margin
of continuing
operations
up by 120 bps
to 11.0%

Headline
earnings
per share from
continuing operations
up by 15%

Cash
generated
from operations
up by 11%

Gearing
reduced
to 40%
from 48%

Net asset
value per share
up by 13%

Corporate review

The period under review was utilised to consolidate the effect of the various corporate activities initiated in previous periods, which involved business
acquisitions and disposals and operational rationalisation. The effect of this has resulted in continued focus on strategically aligned, established
businesses with high barriers to entry that enhance the group's quality of earnings in respect of sustainability, solid margins and strong cash conversion.
The implementation of this strategy produced pleasing results for the period.

CONTRACTUAL
LOGISTICS /
Specialised contractual
supply chain and
logistics services

PASSENGER
TRANSPORT /
Personnel, commuter,
intercity and tourism
transport

INTEGRATED TIMBER /
Forestry and timber
manufacturing operations
with primary and
secondary processing

CHEMICAL /
Manufacture of PET,
resin and formaldehyde

AUTOMOTIVE
COMPONENTS /
Manufacture of
components used in
new vehicle assembly

INTEGRATED
BEDDING /
Manufacture of foam,
fabrics, springs, bases
and mattresses

Operational review

Diversified Logistics
Revenue of the segment decreased by 1% to R4 099 million for
the period as a result of a lower average fuel price which was
contractually passed on to customers. Margins showed a strong
improvement of 120 bps (from 10.5% to 11.7%) as a result of
continued reallocation of capital toward higher return activities
and a reduction in overhead costs.

The Contractual Logistics division produced strong growth in the food,
petrochemical and infrastructure sectors. Subdued activity in
the mining, agriculture and furniture sectors was well managed
by the division, with a reallocation of resources and strong cost
containment.

The consolidation of the contractual logistics operations into a
single business in order to facilitate growth within
specific industry sectors, to optimise the utilisation of assets
and infrastructure, and to improve efficiencies was concluded during
the period and is operating effectively. Rationalisation of support
functions was completed in December 2015.

The Passenger division performed well with the commuter,
intercity and Gautrain operations offsetting low passenger
activity in the mining and tourism sectors. The division benefited
from a lower average fuel price in certain sectors. Operations in
Mozambique continued to perform well.

Diversified Industrial
Revenue of the segment increased by 8% to R4 142 million for the period.

PG Bison performed well during the period with the upgraded MDF plant
continuing to drive revenue growth through additional volume capacity, and
margin improvement through better raw material utilisation. The division
continued to drive sales of its value added products. Its solid surfacing and
integrated sawmilling operations showed improvement following operational
restructuring.

In the Chemical division, Woodchem performed well with strong market share
gains and the commissioning of its paper impregnation plant. The performance
of Hosaf, which continued to operate at full capacity, remained stable for the
period in spite of import competition. Volatile currency and commodity price
fluctuations were well managed in both operations.

Investment in technology upgrades and continuous improvement projects
have resulted in a good performance by the Automotive Components division,
despite locally manufactured vehicle build volumes remaining flat.

In the Integrated Bedding division, the integration of the various operations into
a single business resulted in efficiency benefits and cost savings which improved
the net margin for the division. The recently acquired Restonic operation
performed to expectation, while the Vitafoam and DesleeMattex operations
both outperformed as a result of their successful integration. The division made
significant progress in the implementation of its strategy of decentralised
mattress assembly and distribution.

Financial review

These are the unaudited results for
the six months ended 31 December 2015.

Revenue and operating profit before capital items
Revenue from continuing operations increased by 3% to R8 189 million from R7 965 million,
with growth coming mainly from the Diversified Industrial segment.

Operating profit before capital items from continuing operations increased by 15%
to R898 million from R780 million, resulting in margins increasing to 11.0% from 9.8%.

The operating profit of the Diversified Logistics segment increased by 10% to R478 million
from R436 million, resulting in margins increasing to 11.7% from 10.5%.

The operating profit of the Diversified Industrial segment increased by 22% to R420 million
from R344 million, resulting in margins increasing to 10.1% from 8.9%.

Headline earnings per share (HEPS)
HEPS from continuing operations increased by 15% to 21.4 cents from 18.6 cents in
the comparative period. HEPS including discontinued operations increased by 12%
to 21.4 cents from 19.1 cents in the comparative period.

Tax rate
The effective tax rate from continuing operations increased to 28.8% from 27.6%, as
a result of the repatriation of funds from non-South African countries.

Cash flow
Cash generated from operations increased by 11% to R391 million from R351 million.

Replacement capital expenditure, net of disposal proceeds and government grants,
amounted to R443 million for the period, and over the long term continues to be managed
in relation to the depreciation charge.

Expansion capital expenditure of R397 million resulted from various growth opportunities in
the group, which include the expansion of the Hosaf plant and the Piet Retief particleboard
plant upgrade.

Debt structure and finance costs
Despite various expansion initiatives currently underway, net interest-bearing debt reduced
to R3 201 million from R3 299 million, which resulted in a further reduction in the gearing
ratio to 40% from 48% and a reduction in finance costs. The debt structure and cover ratios
are reflected as follows:

                                                             1H16            1H15
Debt structure                                                  Rm             Rm
Interest-bearing long-term liabilities                       2 920          3 431
Interest-bearing short-term liabilities                      1 059             79
Bank overdrafts and short-term facilities                      276          1 088
Cash and cash equivalents                                  (1 054)        (1 299)
Net interest-bearing debt                                    3 201          3 299
Total equity (excluding non-controlling interests)           8 037          6 876
Net interest-bearing debt: equity                              40%            48%
EBITDA*                                                      1 323          1 169
Net finance charges*                                           151            163
EBITDA: interest cover (times)**                               9.4            7.2
Net debt: EBITDA (times)**                                     1.2            1.4

* From continuing operations
** Rolling 12 months

Working capital
Consistent with previous interim periods, the first half of the financial year saw a seasonal
investment in working capital.

Inventories reduced by R159 million, accounts receivable increased by R134 million, while
accounts payable reduced by R422 million. The net working capital of the prior period did not
include Restonic.

The net working capital investment remains low relative to the revenue of the group.

Net asset value (NAV)
The NAV per share increased by 13% to 330 cents from 293 cents in the comparative period.

Outlook

Management continues to focus on optimising existing operations, growing market share and
growth in the rest of Africa territories where it has an existing footprint. The following initiatives
have been concluded or are in progress in this regard:

-   Key contracts in the Contractual Logistics division were renewed. It is expected that improved
    efficiencies and significantly reduced costs resulting from the rationalisation of this division
    will result in further contract renewals and extensions.

-   The Passenger division continues to grow its operations in Mozambique.

-   An upgrade of the PG Bison particleboard line in Piet Retief will be commissioned in May 2017
    and will provide additional volume capacity, product quality improvements and better raw
    material utilisation.

-   A high-gloss finishing line will be commissioned at PG Bison's Boksburg operation in
    June 2016 in order to further increase sales of value added products.

-   A paper impregnation line was successfully commissioned at Woodchem during
    December 2015 and is operating ahead of expectation.

-   An expansion of the Hosaf plant will be commissioned in August 2017 and will provide
    significant additional volume capacity and economy of scale benefits.

-   Continued model replacement introductions in the automotive sector provide a solid platform
    for the growth of the Automotive Components division.

-   The efficiency and integration opportunities resulting from the creation of the Integrated
    Bedding division; the implementation of their strategy; and the completion of their new
    factory in Johannesburg in April 2017 are expected to continue to bear fruit.
The group continues to pursue acquisition opportunities in accordance with its
strategy, both at a corporate and divisional level. In view of its strong cash generation and
reduced gearing, the group is well positioned to take advantage of opportunities in this regard,
as they arise.

To this end, subsequent to the reporting date, the group concluded the acquisition of Autovest
Limited (Autovest), subject to certain conditions precedent. Autovest is engaged in the
manufacture of automotive accessories which are sold in the retail aftermarket via franchised fitment centres.
This provides the Automotive Components division, which is currently engaged in the supply of components
for domestic new vehicle build only, with access to the broader retail aftermarket. This aftermarket
includes imported and pre-owned vehicles, in addition to domestic new vehicle build.

Appreciation

The board of directors records its appreciation for the continued support and loyalty of the
group's employees, shareholders, customers and suppliers.

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                           GN Chaplin
Independent non-executive chairman            Executive deputy chairman          Chief executive officer

15 February 2016

KAP Industrial Holdings Limited ("KAP" or "the company" or "the group")
Non-executive directors: J de V du Toit (Chairman)*, MJ Jooste, AB la Grange, IN Mkhari*, SH Müller*, SH Nomvete*, PK Quarmby*, DM van der Merwe, CJH van Niekerk*
*Independent non-executive directors
Executive directors: KJ Grové (Executive deputy chairman), GN Chaplin (Chief executive officer), JP Haveman (Chief financial officer)
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000171963
Registered address: 28 6th Street, Wynberg, Sandton, 2090
Postal address: PO Box 18, Stellenbosch, 7599
Telephone: 021 808 0900
Facsimile: 021 808 0901
E-mail: info@kap.co.za
Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001
Company secretary: Steinhoff Secretarial Services Proprietary Limited
Auditors: Deloitte & Touche
Sponsor: PSG Capital Proprietary Limited

Condensed consolidated financial statements

CONDENSED CONSOLIDATED                                                     Six months    Six months                        Year
INCOME STATEMENT                                                                ended         ended                       ended
                                                                          31 Dec 2015   31 Dec 2014                 30 Jun 2015
                                                                            Unaudited    Unaudited*             %       Audited
                                                                 Notes             Rm            Rm        change            Rm
Revenue                                                                         8 189         7 965             3        15 664
Operating profit before depreciation, amortisation
and capital items                                                               1 323          1 169           13         2 450
Depreciation and amortisation                                                   (425)          (389)                      (784)
Operating profit before capital items                                             898            780           15         1 666
Capital items                                                        1            (8)              5                       (35)
Earnings before interest, dividend income, associate
and joint venture earnings and taxation                                           890            785           13         1 631
Net finance charges                                                             (151)          (163)                      (289)
Share of profit of associate and joint venture companies                          10               2                        –
Profit before taxation                                                           749             624           20         1 342
Taxation                                                                        (213)          (166)                      (361)
Profit for the period from continuing operations                                 536             458           17           981
Loss for the period from discontinued operations                    2            –             (26)                        (51)
Profit for the period                                                            536             432           24           930
Attributable to:
Owners of the parent                                                             513           415            24           888
Non-controlling interests                                                         23            17                          42
Profit for the period                                                            536           432            24           930
From continuing and discontinued operations:
Headline earnings per ordinary share (cents)                                 21.4             19.1            12          40.2
Fully diluted headline earnings per ordinary share (cents)                   21.1             18.9            12          39.6
Basic earnings per ordinary share (cents)                                    21.2             17.7            20          37.2
Fully diluted earnings per ordinary share (cents)                            20.8             17.5            19          36.7
From continuing operations:
Headline earnings per ordinary share (cents)                                 21.4             18.6            15          40.6
Fully diluted headline earnings per ordinary share (cents)                   21.1             18.4            15          40.1
Basic earnings per ordinary share (cents)                                    21.2             18.8            13          39.4
Fully diluted earnings per ordinary share (cents)                            20.8             18.6            12          38.8
Number of ordinary shares in issue (m)                                      2 441            2 346             4         2 423
Weighted average number of ordinary shares in issue (m)                     2 424            2 346             3         2 384
Earnings attributable to ordinary shareholders (Rm)                           513              415            24           888
Headline earnings attributable to ordinary shareholders (Rm)       3          519              449            16           959

ADDITIONAL INFORMATION                                                                  Six months    Six months          Year
                                                                                             ended         ended         ended
                                                                                       31 Dec 2015   31 Dec 2014   30 Jun 2015
                                                                                         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             (5)             1           (1)
(Loss)/profit on disposal of investments and impairments                                       (3)             4          (34)
                                                                                               (8)             5          (35)
From discontinued operations:
Loss on disposal of property, plant and equipment and investment property                        –           (1)           (6)
Loss on disposal of investments and impairments                                                  –          (40)          (51)
                                                                                                 –          (41)          (57)
                                                                                               (8)          (36)          (92)
Note 2: Loss for the period from discontinued operations
Revenue                                                                                          –           381           474
Operating profit/(loss) before depreciation, amortisation and capital items                      –            17           (1)
Depreciation and amortisation                                                                    –           (4)           (7)
Operating profit/(loss) before capital items                                                     –            13           (8)
Capital items                                                                                    –          (41)          (57)
Deficit before interest, dividend income, associate and joint venture earnings
and taxation                                                                                     –          (28)          (65)
Net income from investments                                                                      –             –             –
Loss before taxation                                                                             –          (28)          (65)
Taxation                                                                                         –             2            14
Loss for the period from discontinued operations                                                 –          (26)          (51)
Note 3: Headline earnings attributable to ordinary shareholders
Earnings attributable to owners of the parent                                                  513           415           888
Adjusted for:
Capital items (note 1)                                                                           8            36            92
Taxation effects of capital items                                                              (2)           (2)          (21)
Non-controlling interests' portion of capital items (net of taxation)                            –             –             1
Capital items of associate and joint-venture companies (net of taxation)                         –             –           (1)
                                                                                               519           449           959
FAIR VALUES OF FINANCIAL                                            Fair value       Fair value     Fair value           Fair
INSTRUMENTS                                                              as at            as at          as at          value
                                                                   31 Dec 2015      31 Dec 2014    30 Jun 2015      hierarchy
                                                                            Rm               Rm             Rm
Derivative financial assets                                                 54               16              3        Level 2
Derivative financial liabilities                                             –              (5)            (3)        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.

CONDENSED CONSOLIDATED                                                              31 Dec 2015   31 Dec 2014     30 Jun 2015
STATEMENT OF FINANCIAL POSITION                                                       Unaudited     Unaudited         Audited
                                                                                             Rm            Rm              Rm
ASSETS
Non-current assets
Goodwill and intangible assets                                                            1 603         1 261           1 598
Property, plant and equipment and investment properties                                   7 600         6 860           7 129
Consumable biological assets                                                              1 844         1 917           1 824
Investments in associate and joint venture companies                                        152           148             140
Investments and loans                                                                         1            22               1
Deferred taxation assets                                                                     89            66              85
                                                                                         11 289        10 274          10 777
Current assets
Inventories                                                                               1 266         1 425           1 179
Accounts receivable and other current assets                                              2 891         2 757           2 575
Short-term loans                                                                             23           159              23
Cash and cash equivalents                                                                 1 054         1 299           1 370
                                                                                          5 234         5 640           5 147
Total assets                                                                             16 523        15 914          15 924
EQUITY AND LIABILITIES
Capital and reserves
Ordinary stated share capital                                                             7 318         6 970           7 318
Reserves                                                                                    719          (94)             443
                                                                                          8 037         6 876           7 761
Non-controlling interests                                                                   181           154             169
Total equity                                                                              8 218         7 030           7 930
Non-current liabilities
Interest-bearing long-term liabilities                                                    2 920         3 431           3 129
Deferred taxation liabilities                                                             1 196         1 027           1 086
Other long-term liabilities and provisions                                                   92            75              93
                                                                                          4 208         4 533           4 308
Current liabilities
Accounts payable, provisions and other current liabilities                                2 762         3 184           3 356
Interest-bearing short-term liabilities                                                   1 059            79             327
Bank overdrafts and short-term facilities                                                   276         1 088               3
                                                                                          4 097         4 351           3 686
Total equity and liabilities                                                             16 523        15 914          15 924
Net asset value per ordinary share (cents)                                                  330           293             320
Net interest-bearing debt to equity (%)                                                      40            48              27

CONDENSED CONSOLIDATED                                                               Six months     Six months           Year
STATEMENT OF COMPREHENSIVE                                                                ended          ended          ended
INCOME                                                                              31 Dec 2015    31 Dec 2014    30 Jun 2015
                                                                                      Unaudited      Unaudited        Audited
                                                                                             Rm             Rm             Rm
Profit for the period                                                                       536            432            930
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries                                  95              4             27
Total comprehensive income for the period                                                   631            436            957
Total comprehensive income attributable to:
Owners of the parent                                                                        606            419            916
Non-controlling interests                                                                    25             17             41
Total comprehensive income for the period                                                   631            436            957

CONDENSED CONSOLIDATED                                                         Six months    Six months           Year
STATEMENT OF CHANGES IN EQUITY                                                      ended         ended          ended
                                                                              31 Dec 2015   31 Dec 2014    30 Jun 2015
                                                                                Unaudited     Unaudited        Audited
                                                                                       Rm            Rm             Rm
Balance at beginning of the period                                                  7 930         6 859          6 859
Changes in ordinary stated share capital
Net shares issued                                                                       –              –           348
Changes in reserves
Total comprehensive income for the period attributable to owners
of the parent                                                                         606            419           916
Dividends and capital distributions paid                                            (363)          (282)         (286)
Share-based payments                                                                   33             29            71
Other reserve movements                                                                 –              1             3
Changes in non-controlling interests
Total comprehensive income for the period attributable
to non-controlling interests                                                           25             17            41
Dividends and capital distributions paid                                             (13)           (13)          (22)
Balance at end of the period                                                        8 218          7 030         7 930
Comprising:
Ordinary stated share capital                                                      7 318          6 970         7 318
Reverse acquisition reserve                                                      (3 952)        (3 952)       (3 952)
Distributable reserves                                                             4 362          3 735         4 212
Share-based payment reserve                                                          161             86           128
Other reserves                                                                       148             37            55
Non-controlling interests                                                            181            154           169
                                                                                   8 218          7 030         7 930

CONDENSED CONSOLIDATED                                                         Six months    Six months           Year
STATEMENT OF CASH FLOWS                                                             ended         ended          ended
                                                                              31 Dec 2015   31 Dec 2014    30 Jun 2015
                                                                                Unaudited    Unaudited*        Audited
                                                                                       Rm            Rm             Rm
Operating profit before capital items                                                 898           780          1 666
Depreciation and amortisation                                                         425           389            784
Operating profit/(loss) before depreciation, amortisation and capital items
from discontinued operations                                                            –            17            (1)
Net fair value adjustments of consumable biological assets and decrease
due to harvesting                                                                    (15)          (38)           (86)
Other non-cash adjustments                                                             45            55            114
Cash generated before working capital changes                                       1 353         1 203          2 477
(Increase)/decrease in inventories                                                   (98)         (214)             1
Increase in receivables                                                             (288)         (306)           (17)
Decrease in payables                                                                (576)         (332)          (186)
Changes in working capital                                                          (962)         (852)          (202)
Cash generated from operations                                                        391           351          2 275
Dividends received                                                                      2             –              2
Dividends paid                                                                      (379)         (295)          (304)
Net finance charges                                                                 (151)         (163)          (290)
Taxation paid                                                                       (159)          (71)          (200)
Net cash (outflow)/inflow from operating activities                                 (296)         (178)          1 483
Additions to property, plant and equipment – expansion                              (397)         (213)          (512)
Additions to property, plant and equipment – replacement, net of proceeds
and government grants received                                                      (443)         (384)          (683)
Proceeds on disposal of investments                                                     –           160            470
Acquisition of investments                                                              –             –          (142)
Other investing activities                                                           (23)           (10)            (7)
Net cash outflow from investing activities                                           (863)         (447)          (874)
Net cash outflow/(inflow) from operating and investing activities                   (1 159)        (625)           609
Net cash inflow/(outflow) from financing activities                                    804          575           (602)
Net (decrease)/increase in cash and cash equivalents                                  (355)        (50)              7
Effects of exchange rate changes on cash and cash equivalents                           39            1             15
Cash and cash equivalents at beginning of period                                      1 370        1 348          1 348
Cash and cash equivalents at end of period                                            1 054        1 299          1 370

SEGMENTAL ANALYSIS                                                         Six months       Six months                                Year
                                                                                ended            ended                               ended
                                                                          31 Dec 2015      31 Dec 2014                         30 Jun 2015
                                                                            Unaudited       Unaudited*               %             Audited
                                                                                   Rm               Rm          change                  Rm
Revenue from continuing operations
Diversified Logistics                                                           4 099             4 142               (1)               7 863
Diversified Industrial                                                          4 142             3 853                 8               7 885
                                                                                8 241             7 995                 3              15 748
Intersegment revenue eliminations                                                (52)              (30)                                  (84)
                                                                                8 189             7 965                 3              15 664
Operating profit before capital items from
continuing operations
Diversified Logistics                                                              478                 436              10               880
Diversified Industrial                                                             420                 344              22               786
                                                                                   898                 780              15             1 666

                                                    31 Dec 2015           31 Dec 2014                        30 Jun 2015
                                                      Unaudited             Unaudited                            Audited
                                                             Rm      %             Rm                   %             Rm                    %
Total assets
Diversified Logistics                                    6 151       40         5 734                   40            5 624                39
Diversified Industrial                                   9 066       60         8 461                   60            8 616                61
                                                        15 217      100        14 195                  100           14 240               100

RECONCILIATION OF TOTAL ASSETS PER                                                         31 Dec 2015       31 Dec 2014       30 Jun 2015
STATEMENT OF FINANCIAL POSITION                                                              Unaudited         Unaudited           Audited
TO TOTAL ASSETS PER SEGMENTAL ANALYSIS                                                              Rm                Rm                Rm

Total   assets per statement of financial position                                              16 523           15 914             15 924
Less:   Cash and cash equivalents                                                              (1 054)          (1 299)            (1 370)
Less:   Investments in associate and joint venture companies                                     (152)            (148)              (140)
Less:   Interest-bearing long-term loans receivable                                                  –             (22)                  –
Less:   Interest-bearing short-term loans receivable                                              (23)            (159)               (23)
Less:   Related party receivables                                                                 (77)             (91)              (151)
Total   assets per segmental analysis                                                           15 217           14 195             14 240

GEOGRAPHICAL                                           Six months                         Six months
INFORMATION                                                 ended                              ended                     Year ended
                                                      31 Dec 2015                        31 Dec 2014                    30 Jun 2015
                                                        Unaudited                         Unaudited*                        Audited
                                                               Rm              %                  Rm            %                Rm         %
Revenue
South Africa                                               7 170              88              6 991             88            13 856       88
Rest of Africa                                             1 019              12                974             12             1 808       12
                                                           8 189             100              7 965            100            15 664      100

                                                      31 Dec 2015                        31 Dec 2014                    30 Jun 2015
                                                        Unaudited                          Unaudited                        Audited
                                                               Rm              %                  Rm            %                Rm         %
Non-current assets
South Africa                                               10 117            90               9 292             90            9 720        90
Rest of Africa                                             1 172             10                 982             10            1 057        10
                                                          11 289            100              10 274            100            10 777      100

* Prior period disclosure has been restated to reflect discontinued operations.

NOTES TO THE FINANCIAL STATEMENTS

1.   Statement of compliance
     The condensed consolidated interim financial information has been prepared and
     presented in accordance with the framework concepts and the measurement and
     recognition requirements of International Financial Reporting Standards (IFRS), the SAICA
     Financial Reporting Guides as issued by the Accounting Practices committee and Financial
     Reporting Pronouncements as issued by the Financial Reporting Standards Council, the
     Listings Requirements of the JSE Limited, the information as required by IAS 34: Interim
     Financial Reporting and the requirements of the South African Companies Act, No. 71 of
     2008 as amended. The consolidated interim financial information has been prepared using
     accounting policies that comply with IFRS which are consistent with those applied in the
     financial statements for the year ended 30 June 2015.

2.   Basis of preparation
     The condensed consolidated 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 condensed consolidated
     interim financial statements for the six months ended 31 December 2015 was supervised
     by John Haveman, the group's chief financial officer.

3.   Changes to comparative results
     In addition to treating the Footwear business as discontinued operations, the
     December 2014 income statement has been re-presented to reflect the discontinued
     operations reported in the June 2015 annual financial statements, i.e. Fresh Freight,
     Bedding Component Manufacturers, Weatherboard sawmill and Braecroft plantations.

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 15 February 2016.

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 2015.

6.   Post-balance sheet events
     With the exception of the Autovest acquisition referred to elsewhere in this announcement,
     no significant events have occurred in the period between the end of the period under
     review and the date of this report.

7.   Changes to the board/board committees
     There were no changes to the board of directors during the period under review.

www.kap.co.za

By order of the Board
Steinhoff Africa Secretarial Services Proprietary Limited
Company Secretary

15 February 2016
Sponsor: PSG Capital Proprietary Limited


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