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Results for the six months ended 30 June 2017 and declaration of scrip distribution with a cash dividend alternative
Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT JSE ISIN: ZAE 000156501
("Mpact" or "the Group" or "the Company")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017 AND DECLARATION OF
SCRIP DISTRIBUTION WITH A CASH DIVIDEND ALTERNATIVE
SALIENT FEATURES
- Revenue increased by 3.1% to R4.8 billion (June 2016: R4.7 billion)
- EBITDA of R433 million (June 2016: R552 million)
- Underlying operating profit of R169 million (June 2016: R322 million)
- Underlying earnings per share of 34.3 cents (June 2016: 95.2 cents)
- Return on Capital Employed ("ROCE") of 10.6% (June 2016: 16.7%)
- Gearing at 36.3% (June 2016: 33.8%)
- Interim gross dividend of 15 cents per share (June 2016: 30 cents per share)
COMPANY PROFILE
Mpact is one of the leading paper and plastics packaging businesses in southern Africa, listed on the JSE's
Main Board in the Industrial - Paper and Packaging sector. The Group has leading market positions in
southern Africa in recovered paper collection, corrugated packaging, recycled-based cartonboard and
containerboard, polyethylene-terephthalate ("PET") preforms and trays, recycled PET ("rPET"), styrene trays
and plastic jumbo bins. These leading market positions allow Mpact to meet the increasing requirements of
its customers and achieve economies of scale and cost effectiveness at the various operations.
Mpact has 42 operating sites, of which 21 are manufacturing operations, in South Africa, Namibia,
Mozambique and Botswana. Sales in South Africa account for approximately 89% of Mpact's total revenue
for the current period while the balance was predominantly to customers in the rest of Africa.
As at 30 June 2017 Mpact employed 4,994 people (December 2016: 4,998 people).
COMMENTARY
Mpact's results for the six months ended 30 June 2017 reflect challenging trading and macro-economic
conditions. When compared to the same period last year, profitability was negatively impacted by lower sales
volumes in both the Paper and Plastics businesses and higher recovered paper costs. In addition, the
scheduled downtime for the R765 million Felixton paper mill upgrade project, which is due to be completed
as planned during the second half of 2017, resulted in lost contribution of R24 million for the period.
GROUP PERFORMANCE
Group revenue of R4.8 billion was 3.1% higher than the comparable prior year period. Excluding Remade,
which was acquired in May 2016, Group revenue increased 0.3% with external sales volumes declining 1.8%
on the back of lower domestic demand and increased competition, partially offset by increased exports.
Earnings before interest, tax, depreciation and amortisation (EBITDA) of R432.6 million declined by 21.7%
due to lower domestic sales volumes in the Paper and Plastics businesses and higher recovered paper
costs.
Underlying operating profit of R169.1 million declined by 47.4% on the back of higher depreciation when
compared to the prior year period.
Return on Capital Employed of 10.6% (June 2016: 16.7%) reflects the weaker trading environment and
recent capital investments which have not yet contributed to profitability.
Paper business
Revenue in the Paper business grew 7.4% to R3.7 billion. Revenue excluding Remade increased 3.7% while
external sales volumes declined 1.7%.
A combination of increased competition, the effects of drought on fruit packaging and subdued consumer
demand resulted in lower domestic sales volumes compared to the prior year period. Lower domestic
containerboard sales were offset by increased exports.
Higher international recovered paper prices and increased local demand resulted in higher recovered paper
costs which could not be recovered in the selling prices of containerboard or cartonboard.
Underlying operating profit of R177.0 million was down 39.4%, on the back of lower domestic sales volumes,
higher recovered paper costs and R24 million lost contribution related to the planned project downtime at the
Felixton paper mill.
Plastics business
Revenue in the Plastics business decreased by 8.5% to R1.2 billion due to lower sales volumes and lower
average selling prices.
Total external sales volumes declined 1.3% due to subdued consumer demand, the closure of the Zimbabwe
operation in December 2016 and increased competition, particularly in the trays and films sector. Plastic
Converting business sales volumes declined 5%. Despite Mpact Polymers' throughput being constrained
during the first five months as a result of insufficient grinding capacity, 3,896 tonnes of SavukaTM PET (June
2016: 2,361 tonnes) were sold during the six months ended 30 June 2017 of which 2,393 tonnes was to
external customers (June 2016: 643 tonnes).
Underlying operating profit of R27.2 million declined 61.0% from the comparable prior year period due to
lower volumes and average prices.
Net finance costs
Net finance costs increased by 9.7% to R99.7 million (June 2016: R90.9 million) due to higher interest rates on
higher net debt during the period. Interest capitalised on Phase 2 of the Felixton mill upgrade amounted to
R12.6 million.
Tax
The effective tax rate for the period was 29.8% (June 2016: 34.4%) which is higher than the statutory rate of
28%, mainly due to the non-recognition of deferred tax on certain tax losses in Mpact Polymers.
In deriving the effective tax rate, Mpact has not included any recognition of the Section 12i tax incentive
relating to the Felixton mill upgrade project, which is conditional upon meeting certain requirements following
commissioning. It is estimated that once recognised, the Section 12i tax incentive would increase earnings per
share by 70 cents. The recognition of these benefits will be reconsidered during the second half of the financial
year.
Earnings per share
Basic and headline earnings per share for the period were 34.3 cents (June 2016: 95.2 cents) and 33.9 cents
(June 2016: 94.9 cents), respectively.
Net debt
Net debt increased to R2.3 billion (June 2016: R1.9 billion) after investing R411 million in property, plant and
equipment and utilising R141 million to fund working capital. The gearing ratio was 36.3% (June 2016: 33.8%).
Mpact has successfully refinanced R950 million of committed interest-bearing borrowings, which were to fall
due in December 2017, for an additional four years.
OUTLOOK
Prevailing trading conditions indicate that consumer spending will remain subdued for the second half of the
reporting period and competition will remain intense across most of the Group's product segments. The effects
of the prolonged drought in several fruit growing regions will also continue to negatively affect the Group's fruit
packaging volumes.
Mpact Polymers is expected to show an improved full-year trading performance compared to the prior year with
improved quality, increased throughput and products which are well accepted in the market.
The R765 million Felixton paper mill upgrade project is progressing well. The paper machine was successfully
commissioned as scheduled during July 2017. Initial indications regarding quality, throughput and cost are
encouraging with the mill planning to ramp up to full capacity by the end of 2018. The final major construction
concerns the automated finished goods warehouse which is planned for completion in December 2017.
The Group is nearing the end of an extensive capital investment programme with many of the investments
expected to reflect positively in the Group's earnings and returns from 2018. We remain confident in our ability
to weather the storm and to realise profitable growth over the medium term.
Scrip Dividend and Cash Dividend alternative
1. Introduction
Notice is hereby given that the Board has declared an interim distribution for the six months ended 30 June 2017, by way of the issue of
fully-paid Mpact ordinary shares of no par value each ("the Scrip Distribution") as a scrip distribution payable to ordinary shareholders
("Shareholders") recorded in the register of the Company at the close of business on the Record Date, being Friday, 8 September 2017.
Shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive a gross cash dividend of 15 cents per ordinary
share instead of the Scrip Distribution, which will be paid only to those Shareholders who elect to receive the cash dividend, in respect of all
or part of their shareholding, on or before 12h00 on Friday, 8 September 2017 ("the Cash Dividend").
The Cash Dividend has been declared from income reserves. A dividend withholding tax of 20% will be applicable to all Shareholders not
exempt therefrom, after deduction of which the net Cash Dividend is 12 cents per Mpact ordinary share.
The new ordinary shares will, pursuant to the Scrip Distribution, be settled by way of capitalisation of the Company's distributable
retained profits.
The Company's total number of issued ordinary shares as at 8 August 2017 is 170,882,251. Mpact's income tax reference number
is 9003862175.
2. Terms of the Scrip Distribution
The number of Scrip Distribution shares to which each of the Shareholders will become entitled pursuant to the Scrip Distribution (to the
extent that such Shareholders have not elected to receive the Cash Dividend) will be determined by reference to such Shareholder's ordinary
shareholding in Mpact (at the close of business on the Record Date, being Friday, 8 September 2017) in relation to the ratio that 15 cents
bears to the volume weighted average price ("VWAP") of an ordinary Mpact share traded on the JSE during the 30-day trading period ending
on Monday, 28 August 2017. Details of the ratio will be announced on the Stock Exchange News Service ("SENS") of the JSE in accordance
with the timetable below.
Where a Shareholder's entitlement to new Mpact ordinary shares calculated in accordance with the above formula gives rise to a fraction of a
new ordinary share, such fraction of a new ordinary share will be rounded down to the nearest whole number, resulting in allocations of whole
ordinary shares and a cash payment for the fraction.
The applicable cash payment will be determined with reference to the VWAP of an ordinary Mpact share traded on the JSE on Wednesday,
6 September 2017, (being the day on which an ordinary Mpact share begins trading 'ex' the entitlement to receive the Scrip Distribution or the
Cash Dividend alternative), discounted by 10%.
The applicable cash payment will be announced on SENS on Thursday, 7 September 2017.
3. Circular and salient dates
A circular providing Shareholders with full information on the Scrip Distribution and the Cash Dividend alternative, including a Form of Election
to elect to receive the Cash Dividend alternative will be posted to Shareholders on or about Tuesday, 15 August 2017. The salient dates of
events thereafter are as follows:
2017
Announcement released on SENS in respect of the ratio applicable to the Scrip Distribution, based on the
30-day volume weighted average price ending on Monday, 28 August 2017, by 11h00 on Tuesday, 29 August
Announcement published in the press of the ratio applicable to the Scrip Distribution, based on the 30-day
volume weighted average price ending on Monday, 28 August 2017 on Wednesday, 30 August
Last day to trade in order to be eligible to receive the Scrip Distribution or the Cash Dividend alternative Tuesday, 5 September
Ordinary shares trade "ex" the Scrip Distribution and the Cash Dividend alternative on Wednesday, 6 September
Listing and trading of maximum possible number of ordinary shares on the JSE in terms of the Scrip
Distribution from the commencement of business on Wednesday, 6 September
Announcement released on SENS in respect of the cash payment applicable to fractional entitlements,
based on the volume weighted average price on Wednesday, 6 September 2017, discounted by 10%, by
11h00 on Thursday, 7 September
Last day to elect to receive the Cash Dividend alternative instead of the Scrip Distribution, Forms of Election
to reach the Transfer Secretaries by 12h00 on Friday, 8 September
Record Date in respect of the Scrip distribution and the Cash Dividend alternative Friday, 8 September
Scrip Distribution certificates posted and Cash Dividend payments made, CSDP/broker accounts
credited/updated, as applicable, on Monday, 11 September
Announcement relating to the results of the Scrip Distribution and the Cash Dividend alternative released on
SENS on Monday, 11 September
Announcement relating to the results of the Scrip Distribution and the Cash Dividend alternative published in
the press on Tuesday, 12 September
JSE listing of ordinary shares in respect of the Scrip Distribution adjusted to reflect the actual number of
ordinary shares issued in terms of the Scrip Distribution at the commencement of business on or about Wednesday, 13 September
All times provided are South African local times. The above dates and times are subject to change. Any material change will be announced on SENS.
Share certificates may not be dematerialised or rematerialised between Wednesday, 6 September 2017 and Friday, 8 September 2017, both
days inclusive.
Change in directorate
There has been no change to the Board of directors for the period ended 30 June 2017.
AJ Phillips BW Strong
Chairman Chief Executive Officer
8 August 2017
Condensed consolidated interim statement
of comprehensive income
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Notes Rm Rm Rm
Revenue 4 4,833.9 4,687.7 10,098.6
Cost of sales (3,118.3) (2,892.4) (6,281.4)
Gross margin 1,715.6 1,795.3 3,817.2
Administration and other operating expenditure (1,546.5) (1,473.6) (3,070.9)
Operating profit 5 169.1 321.7 746.3
Share of equity accounted investees' profit 5.1 5.9 16.2
Profit on sale of equity accounted investees' - - 0.8
Profit from operations and equity accounted investees 174.2 327.6 763.3
Net finance costs (99.7) (90.9) (191.0)
Finance costs 6 (104.2) (101.5) (209.4)
Investment income 4.5 10.6 18.4
Fair value gain - - 7.2
Profit before tax 74.5 236.7 579.5
Income tax expense (22.2) (81.5) (182.7)
Profit for the period 52.3 155.2 396.8
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Actuarial gains on post-retirement benefit schemes - - 3.6
Tax effect - - (1.0)
Items that may be reclassified subsequently to profit or loss
Effect of cash flow hedges (3.6) (16.1) (18.3)
Tax effect 1.0 4.5 5.1
Exchange differences on translation of foreign operations 1.3 (1.2) (5.6)
Other comprehensive income for the period net of tax (1.3) (12.8) (16.2)
Total comprehensive income for the period 51.0 142.4 380.6
Profit/(loss) attributable to:
Equity holders of Mpact 58.0 157.8 391.1
Non-controlling interests (5.7) (2.6) 5.7
Profit for the period 52.3 155.2 396.8
Comprehensive income/(loss) attributable to:
Equity holders of Mpact 56.5 144.8 374.3
Non-controlling interests (5.5) (2.4) 6.3
Total comprehensive income 51.0 142.4 380.6
Earnings per share (EPS) attributable to equity holders of Mpact 7
Basic EPS (cents) 34.3 95.2 234.6
Diluted EPS (cents) 34.3 94.9 234.0
Condensed consolidated interim statement
of financial position
Unaudited Unaudited Audited
As at As at As at
30 June 30 June 31 December
2017 2016 2016
Notes Rm Rm Rm
ASSET
Non-current assets 4,922.8 4,625.4 4,763.6
Property, plant and equipment 3,652.4 3,368.5 3,489.0
Goodwill and other intangible assets 1,119.3 1,132.3 1,126.1
Investment in equity accounted investees 99.5 95.6 102.1
Financial asset investments 41.4 15.0 41.5
Deferred tax assets 10.2 14.0 4.9
Current assets 3,664.9 3,811.4 3,948.6
Inventories 1,438.8 1,503.5 1,393.2
Trade and other receivables 2,082.3 1,932.6 2,103.1
Derivative financial instruments 1.1 5.7 2.9
Current tax receivable 34.0 9.8 30.9
Cash and cash equivalents 104.8 359.8 405.7
Disposal group asset 3.9 - 12.8
Total assets 8,587.7 8,436.8 8,712.2
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 8 2,605.6 2,505.0 2,532.7
Other reserves 52.7 45.1 28.3
Retained earnings 1,285.8 1,167.8 1,346.3
Equity attributable to the equity holders of Mpact 3,944.1 3,717.9 3,907.3
Non-controlling interests 116.4 98.3 113.3
Total equity 4,060.5 3,816.2 4,020.6
Non-current liabilities 1,838.9 1,791.4 1,844.5
Interest and non-interest bearing borrowings 9 1,431.9 1,379.8 1,417.0
Retirement benefit obligations 52.7 54.4 51.6
Deferred tax liabilities 320.0 301.5 342.5
Derivative financial instruments 8.0 2.2 4.4
Deferred income 26.3 31.8 29.0
Other non-current liabilities - 21.7 -
Current liabilities 2,688.3 2,829.2 2,847.1
Short-term portion of borrowings 9 963.7 923.0 990.0
Trade and other payables 1,691.7 1,874.4 1,772.1
Derivative financial instruments 0.7 12.7 8.6
Short-term portion of deferred income 5.5 5.5 5.5
Provisions 4.4 3.8 5.1
Current tax liabilities 4.7 9.8 3.3
Other current liabilities 14.5 - 51.8
Disposal group liability 3.1 - 10.7
Total equity and liabilities 8,587.7 8,436.8 8,712.2
Condensed consolidated interim statement
of changes in equity
Total
Share- Post- attributable
based Cash flow retirement to equity Non-
Stated payments hedge benefits Other Retained holders of controlling Total
capital reserves reserves reserves reserves(1) Earnings Mpact interests equity
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 31 December
2015 (audited) 2,426.2 33.8 10.0 12.7 (48.7) 1,170.8 3,604.8 107.0 3,711.8
Dividends paid(2) 78.8 - - - (0.6) (132.1) (53.9) - (53.9)
Total comprehensive income - - (11.6) - (1.4) 157.8 144.8 (2.4) 142.4
Share scheme charges for
the period - 11.1 - - - - 11.1 - 11.1
Dividends paid to non-
controlling shareholders - - - - - - - (6.3) (6.3)
Issue/exercise of shares options - (19.5) - - 59.3 (28.7) 11.1 - 11.1
Balance at 30 June
2016 (unaudited) 2,505.0 25.4 (1.6) 12.7 8.6 1,167.8 3,717.9 98.3 3,816.2
Dividends paid(2) 27.7 - - - - (50.3) (22.6) - (22.6)
Total comprehensive income - - (1.6) 2.6 (4.8) 233.3 229.5 8.7 238.2
Purchase of treasury shares - - - - (25.0) - (25.0) - (25.0)
Share scheme charges for
the period - 12.0 - - - - 12.0 - 12.0
Issue/exercise of shares options - - - - - 0.1 0.1 - 0.1
Increase in shareholding
in subsidiary - - - - - - - 6.3 6.3
Deferred settlement charge - - - - - (4.6) (4.6) - (4.6)
Balance at 31 December 2016
(audited) 2,532.7 37.4 (3.2) 15.3 (21.2) 1,346.3 3,907.3 113.3 4,020.6
Dividends paid(2) 72.9 - - - (0.6) (109.0) (36.7) - (36.7)
Total comprehensive income - - (2.6) - 1.1 58.0 56.5 (5.5) 51.0
Share scheme charges for the
period - 13.4 - - - - 13.4 - 13.4
Increase in shareholding in
subsidiary - - - - - - - 8.6 8.6
Issue/exercise of shares options - (17.1) - - 30.2 (9.5) 3.6 - 3.6
Balance at 30 June 2017
(unaudited) 2,605.6 33.7 (5.8) 15.3 9.5 1,285.8 3,944.1 116.4 4,060.5
(1) Other reserves consist of the option to equity holder reserves, revaluation reserves, foreign currency translation reserves and treasury shares.
(2) Dividends declared amounted to R109 million (30 June 2016: R132.1 million, 31 December 2016: R182.4 million) of which R72.9 million (30 June 2016:
R78.8 million, 31 December 2016: R106.5 million) related to a capitalisation issue, of which R0.6 million (30 June 2016: R0.6 million,
31 December 2016: R0.6 million) were issued to the Mpact Incentive Share Trust.
Condensed consolidated interim statement
of cash flows
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Notes Rm Rm Rm
Operating cash flows before movements in working capital 431.8 568.7 1,275.6
Net increase in working capital (140.8) (147.2) (288.9)
Cash generated from operations 13 291.0 421.5 986.7
Taxation paid (47.1) (63.2) (142.3)
Dividends received from equity accounted investees 7.7 2.0 5.6
Net cash inflows from operating activities 251.6 360.3 850.0
Investment in property, plant and equipment and intangible assets (410.8) (444.8) (836.5)
Acquisition of business 14 - (96.3) (89.8)
Other investing activities 9.6 22.6 11.2
Net cash outflows from investing activities (401.2) (518.5) (915.1)
Purchase of treasury shares - - (25.0)
Net proceeds from borrowings (1.0) 170.6 307.4
Finance costs paid (113.2) (101.9) (212.7)
Dividends paid to Mpact shareholders (36.7) (53.9) (76.5)
Other financing activities - (6.3) (10.9)
Net cash (outflows)/inflows from financing activities (150.9) 8.5 (17.7)
Net decrease in cash and cash equivalents (300.5) (149.7) (82.8)
Net cash and cash equivalents at beginning of the period(1) 400.0 482.8 482.8
Net cash and cash equivalents at end of the period(1) 99.5 333.1 400.0
(1) Net cash and cash equivalents comprise of cash and cash equivalents of R104.8 million (30 June 2016: R359.8 million, 31 December 2016: R405.7 million)
and bank overdrafts of R5.3 million (30 June 2016: R26.7 million, 31 December 2016: R5.7 million).
Notes to the condensed consolidated interim
financial statements
1. Basis of preparation
The condensed consolidated interim financial statements have been prepared and presented in accordance with IAS 34 Interim Financial
Reporting as issued by the International Accounting Standards Board (IASB). The condensed consolidated interim financial statements
are in compliance with the JSE Limited's Listing Requirements, the South African Companies Act, 2008, the SAICA Financial Reporting
Guide as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council.
The condensed consolidated interim financial statements are presented in South African Rand, which is the Group's functional currency.
The condensed consolidated interim financial statements have been prepared on the historical cost basis, except for derivative financials
instruments, financial instruments at fair value through profit or loss and available for sale financial assets. The results of the interim period
should be read in conjunction with the audited financial statements for the year ended 31 December 2016.
The preparation of the Group's consolidated results for the half year ended 30 June 2017 was supervised by the Chief Financial Officer,
BDV Clark CA(SA). These results are unaudited.
2. Significant accounting policies, accounting judgements, estimates and assumptions
Significant accounting policies
The accounting policies and methods of computation used are in terms of International Financial Reporting Standards (IFRS) and are
consistent with those applied in the preparation of the annual financial statements for the year ended 31 December 2016.
The following revised accounting standards, which had no significant impact on the Group, were adopted in the current period:
- IAS 7 - Statement of cash flows
- IAS 12 - Income taxes
The following standards will become effective for the financial year beginning on 1 January 2018 except for IFRS 16: Leases which is
effective on 1 January 2019:
IFRS 9 - Financial Instruments
A preliminary assessment has been completed and no impact is expected in respect of the measurement of financial instruments.
The revised financial instrument categories will result in some changes in classification and additional disclosures will be required.
IFRS 15 - Revenue from Contracts with Customers
A preliminary assessment has been completed and the Group does not expect any significant changes to the timing and recognition of
revenue. During the assessment it was noted that additional performance obligations would need to be recognised. It is not envisaged that
the recognition will significantly affect the statement of profit or loss. Additional disclosures will be required once IFRS 15 is adopted.
IFRS 16 - Leases
A preliminary assessment has been completed. The Group envisage that all significant lease agreements will result in an increase in
non-current assets and non-current liabilities as these leases will be capitalised as well as an increase in EBITDA, offset by an increase in
amortisation charge and finance costs.
Significant accounting judgements, estimates and assumptions
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty
were consistent with those applied to the consolidated financial statements for the year ended 31 December 2016.
3. Seasonality
Seasonal effects in the Group's markets have historically resulted in higher revenue and operating profits for the second half, when
compared to the first half.
4. Segment information
The Group's operating segments are reported in a manner consistent with the internal reporting provided to the Group's executive
committee, being the chief operating decision-making body. The Group has two reportable segments namely, Paper and Plastics.
Management has regard to certain operating segment measures in making resource allocation decisions and monitoring segment
performance. The operating segment measures required to be disclosed under IFRS 8 adhere to the recognition and measurement criteria
presented in the Group's accounting policies.
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
Group segment analysis
Revenue
Paper 3,720.3 3,462.5 7,425.0
Plastics 1,157.4 1,264.5 2,752.1
Revenue before inter-segment revenue 4,877.7 4,727.0 10,177.1
Less: Inter-segment revenue (43.8) (39.3) (78.5)
Revenue 4,833.9 4,687.7 10,098.6
Operating segment underlying operating profit/(loss)
Paper 177.0 292.1 664.1
Plastics 27.2 69.7 168.4
Corporate (35.1) (40.1) (48.1)
Operating profit before special items 169.1 321.7 784.4
Special items(1) - - (38.1)
Share of equity accounted investee's profit 5.1 5.9 16.2
Net finance cost (99.7) (90.9) (191.0)
Fair value gain - - 7.2
Profit on sale of equity accounted investee - - 0.8
Profit before tax 74.5 236.7 579.5
Assets
Paper 4,913.7 4,605.6 4,763.5
Plastics 1,992.2 1,989.4 2,009.2
Corporate(2) 1,681.8 1,841.8 1,939.5
Total assets 8,587.7 8,436.8 8,712.2
5. Operating profit
Included in operating profit are:
Amortisation of intangible assets 6.8 5.1 11.9
Depreciation of property, plant and equipment 256.7 225.5 476.2
Impairment of property, plant and equipment - - 15.9
Net foreign currency losses 6.2 20.5 35.6
6. Finance costs
Bank and other borrowings 113.5 101.9 212.5
Defined benefit arrangements 2.5 2.8 5.6
Interest capitalised to qualifying assets (12.6) (3.6) (10.3)
Interest on contingent purchase consideration 0.8 0.4 1.6
104.2 101.5 209.4
7. Earnings per share Cents Cents Cents
Earnings per share (EPS)
Basic EPS 34.3 95.2 234.6
Diluted EPS 34.3 94.9 234.0
Underlying earnings per share(3)
Basic underlying EPS 34.3 95.2 252.7
Diluted underlying EPS 34.3 94.9 252.0
Headline earnings per share(4)
Basic headline EPS 33.9 94.9 242.0
Diluted headline EPS 33.9 94.6 241.4
(1) 31 December 2016: Consist of impairment of PPE of R15.9 million and restructuring costs of R22.2 million.
(2) includes intangible and other non-operating assets
(3) Underlying EPS excludes the impact of special items.
(4) The presentation of Headline EPS is mandated by the JSE Listing requirements. Headline earnings has been calculated in accordance with
Circular 2/2015, 'Headline Earnings', issued by the South African Institute of Chartered Accountants.
The calculation of headline earnings, based on basic earnings is as follows:
Unaudited Unaudited
Six month Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
Profit for the period attributable to equity holders of Mpact 58.0 157.8 391.1
Impairment of property, plant and equipment - - 15.9
Profit on disposal of tangible and intangible assets (1.0) (0.7) (1.1)
Profit on sale of equity accounted investees - - (0.8)
Related tax 0.3 0.2 (1.6)
Headline earnings for the period 57.3 157.3 403.5
Number Number Number
of shares of shares of shares
Basic number of shares outstanding 169,106,287 165,721,399 166,734,753
Effect of dilutive potential ordinary shares 136,924 576,663 436,392
Diluted number of ordinary shares outstanding(1) 169,243,211 166,298,062 167,171,145
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
8. Stated capital
Authorised
217,500,000 shares of no par value - - -
Issued
170,882,251 shares (30 June 2016: 167,657,426; 31 December 2016: 168,485,360) of
no par value. 2,605.6 2,505.0 2,532.7
On 3 April 2017, 2,396,891 (20 April 2016: 1,678,807, 12 September 2016: 847,934)
new ordinary shares were issued to shareholders who elected to receive capitalisation
shares in terms of the capitalisation issue in lieu of a cash dividend.
9. Interest and non-interest bearing borrowings
- Secured interest bearing borrowings(2) 1,403.1 1,318.8 1,368.0
- Finance lease liability 10.0 37.7 28.4
- Instalment loan facility 18.8 23.3 20.6
Non-current borrowings 1,431.9 1,379.8 1,417.0
- Secured interest bearing borrowings(2) 900.0 800.0 902.7
- Unsecured non-interest bearing borrowings 49.0 70.0 61.9
- Finance lease liability 6.6 18.4 16.9
- Instalment loan facility 2.8 7.9 2.8
- Bank overdraft 5.3 26.7 5.7
Current borrowings 963.7 923.0 990.0
Total borrowings 2,395.6 2,302.8 2,407.0
The Company's borrowing powers are not restricted.
The current portion of borrowings is expected to be repaid from operational cash flow
and other borrowings.
(1) Diluted EPS is calculated by adjusting the weighted average number of ordinary shares in issue,
on the assumption of conversion of all potentially dilutive ordinary shares.
(2) The Group has pledged certain assets as collateral against certain borrowings.
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
10. Capital commitments
- Contracted capital commitments 286.1 561.2 361.9
- Approved capital commitments 517.8 530.5 572.5
Capital commitments 803.9 1,091.7 934.4
Commitments of R770.4 million (30 June 2016: R733 million; 31 December 2016:
R889.5 million) will be spent in the next 12 months. The balance of R33.5 million
(30 June 2016: R358.7 million; 31 December 2016: R44.9 million) will be spent in 1 to
5 years.
These commitments will be met from existing cash resources and borrowing facilities
available to the Group.
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
11. Fair value estimation
The fair value of financial instruments that are not traded in an active market (for
example, over-the-counter derivatives) are determined using standard valuation
techniques. These valuation techniques maximise the use of observable market data
were available and rely as little as possible on Group specific estimates.
The significant inputs required to fair value all of the Group's financial instruments are
observable.
Specific valuation methodologies used to value financial instruments include:
- the fair values of interest rate swaps and foreign exchange contracts are calculated
as the present value of expected future cash flows based on observable yield
curves and exchange rates; and
- other techniques, including discounted cash flow analysis, are used to determine
the fair values of other financial instruments.
Financial instruments by category
Financial assets
Trade receivables (Level 2 - Loans and receivables) 2,082.3 1,932.6 2,103.1
Loans and receivables (Level 2 - Loans and receivables) 20.9 15.0 21.0
Available-for-sale investments (Level 3 - Available for sale) 20.5 - 20.5
Derivative financial instruments (Level 2 - At fair value through profit or loss) 1.1 5.7 2.9
Total 2,124.8 1,953.3 2,147.5
Financial liabilities
Borrowings (Level 2 - At amortised cost) 2,395.6 2,302.8 2,407.0
Trade payables (Level 2 - At amortised cost) 1,691.7 1,874.4 1,772.1
Derivative financial instrument (Level 2 - At fair value through profit or loss) 8.7 14.9 13.0
Total 4,096.0 4,192.1 4,192.1
12. Net asset value per share
Net asset value per share is defined as net assets divided by the number of ordinary
shares in issue as at the period-end.
Net asset value per share (cents) 2,376.2 2,276.5 2,386.32
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
13. Cash generated from operations
Profit before taxation 74.5 236.7 579.5
Depreciation, amortisation and impairments 263.5 230.6 504.0
Share-based payments 13.4 11.1 23.1
Net finance costs 99.7 90.9 183.8
Share of equity accounted investee profit (5.1) (5.9) (16.2)
Decrease in provisions (6.8) (5.9) (1.7)
Increase in inventories (47.5) (224.6) (115.5)
Increase/(decrease) in receivables 20.5 108.7 (75.3)
Decrease in payables (113.6) (31.2) (98.1)
Profit on disposal of tangible assets (1.0) (0.7) (1.1)
Fair value change on transactions not qualifying as hedges (6.2) 15.2 13.8
Other non-cash items 2.4 (0.6) (3.3)
Amortisation of government grant (2.8) (2.8) (5.5)
Profit on sale of equity accounted investee - - (0.8)
Cash generated from operations 291.0 421.5 986.7
14. Business combinations
Properties
On 1 May 2016, the Group acquired a 100% interest in six property companies at fair value for a total cash purchase consideration of
R38.6 million. The properties acquired are to be held for use for normal trading of the Group.
Remade Holdings Proprietary Limited
On 1 May 2016, the Group acquired a 100% interest in Remade Holdings Proprietary Limited for a purchase consideration of R89.1 million.
The acquisition of Remade Holdings Proprietary Limited complements a number of initiatives by Mpact Recycling to expand its own
collections of paper, plastics and to increase recycling rates of these materials in South Africa. These initiatives increase the material available
for the Felixton Mill, Mpact Polymers and the recently commissioned liquid packaging recycling plant at the Springs Paper Mill.
15. Contingent liabilities and contingent assets
a. Contingent liabilities for the Group comprise aggregate amounts at 30 June 2017 of R7.2 million (30 June 2016: R7.9 million;
31 December 2016: R7.1 million) in respect of loans and guarantees given to banks and other third parties.
b. A Group mill is the subject of a land claim, which should not have a material impact on the financial position of the Group.
c. In 2013, a settlement was reached in respect of a dispute relating to the valuation of put options in a group subsidiary. The settlement
agreement provides for a deferred payment contingent upon the achievement of certain EBITDA and ROCE levels for the financial years
2017 to 2018, subject to a maximum amount of R1.9 million.
d. There were no significant contingent assets for the Group at 30 June 2017.
e. As advised to the shareholders in the prior financial year, the Company is subject to a Competition Commission investigation.
The directors are unable at this stage to determine what the outcome of the investigation will be.
16. Related parties
The Group has a related party relationship with non-controlling shareholders of subsidiaries, its associates, joint ventures and directors.
The Group, in the ordinary course of business, enter into various sales, purchases and services transactions with joint ventures and
associates and others in which the Group has a material interest. These transactions are under terms that are no less favourable than those
arranged with third parties.
Details of transactions and balances between the Group and related parties are disclosed below:
Unaudited Unaudited
Six months Six months Audited
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
Rm Rm Rm
Sales to related parties 377.0 364.8 785.0
Purchases from related parties 0.2 0.2 2.5
Interest expenses 12.5 11.5 20.6
Minority shareholder loans 292.1 290.2 292.6
Loans to related parties 1.2 0.9 1.4
Receivables due from related parties 207.4 192.9 244.1
Payables due to related parties 20.7 23.4 19.1
17 Subsequent events
The directors are not aware of any matters or circumstances arising subsequent to 30 June 2017 that require any additional disclosure or
adjustment to the interim financial statements.
COMPANY INFORMATION
Mpact Limited
(Incorporated in the Republic of South Africa)
(Company registration number 2004/025229/06)
Income tax number: 9003862175
JSE Share Code: MPT JSE ISIN: ZAE 000156501
("Mpact" or "the Group" or "the Company")
Directors:
Independent Non-Executive:
AJ Phillips (Chairman), NP Dongwana, NB Langa-Royds, M Makanjee, TDA Ross, AM Thompson
Executive:
BW Strong (Chief Executive Officer), BDV Clark (Chief Financial Officer)
Company secretary:
MN Sepuru
Registered office:
4th Floor, No.3 Melrose Boulevard, Melrose Arch, 2196
(Postnet Suite #179, Private Bag X1, Melrose Arch, 2076)
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
(PO Box 4844, Johannesburg, 2000, South Africa)
Sponsors:
Rand Merchant Bank (a division of FirstRand Bank Limited)
1 Merchant Place, corner Fredman Drive and Rivonia Road, Sandton, 2196
(PO Box 786273, Sandton, 2146)
Disclaimer
This document including, without limitation, those statements concerning the demand outlook, expansion projects and its capital resources and
expenditure, may be considered to be forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty and
although Mpact believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements
as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in
the regulatory environment and other government action and business and operational risk management. While Mpact has taken reasonable
care to ensure the accuracy of the information presented, Mpact accepts no responsibility for any consequential, indirect, special or incidental
damages, whether foreseeable or unforeseeable, based on claims arising out of misrepresentation or negligence arising in connection with
a forward-looking statement. This document is not intended to contain any profit forecasts or profit estimates and has not been reviewed or
reported on by the auditors.
www.mpact.co.za
info@mpact.co.za
Date: 08/08/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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