Wrap Text
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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