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Unaudited Condensed Consolidated Results for the Six Months Ended 31 August 2017
MASTER PLASTICS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2016/323930/06)
Share code: MAP ISIN: ZAE000242921
("Master Plastics" or "the Company" or "the Group")
Unaudited condensed consolidated results
for the six months ended 31 August 2017
KEY HIGHLIGHTS
- Results to date in line with the Pre-listing Statement Forecast of 23.68 cents EPS
and HEPS for full year
- Headline Earnings per Share for 6 months of 12.2 cents
- Repurchased a total of 16.8 million shares
- Net Tangible Asset Value per Share of 139.4 cents
- Net cash position maintained subsequent to R75 million dividend payment
COMMENTARY
INTRODUCTION
Master Plastics, which was unbundled from Astrapak Limited on 24 May 2017, is involved in the manufacture and
provision of specific products and solutions to customers operating in the agricultural, food, produce, dairy
and general industrial markets. Its offering extends beyond traditional plastic products, also being a market
leader in the supply and design of undercover farming nets and structures and geotextile fibres for concrete
reinforcement. The Group will continue to explore opportunities to better service its chosen end markets and
provide a broader range of its customers' requirements.
STATE OF THE BUSINESS
During the reporting period the focus at a Group level has been to establish and enhance the operational platform
in order to support the Group's strategic plans as outlined at listing and to provide operational support and leverage
to the existing underlying operations in order to achieve their performance targets. Time and financial resources have
been invested to support this objective, which has since been completed. The operations have remained focused on the
execution of the strategies set prior to the unbundling. These strategies remain relevant and have proven to be key
in ensuring that the businesses remain resilient and perform ahead of the plan, despite challenging market conditions.
All three of the underlying operations, being Barrier Film Converters Proprietary Limited, Peninsula Packaging and
Plusnet-Geotex (both divisions of Master Plastics) are profitable and continue to enjoy a preferred supplier status
in many of their chosen market segments.
FINANCIAL RESULTS
As the Group was only established in the last two months of the 2017 financial year, no comparatives are presented for
the period being reported upon. The audited results for the two-month financial period ended 28 February 2017 is
however presented and the amounts are not comparable.
In Annexure 5 of the Pre-listing Statement dated 5 May 2017, as issued to shareholders ("the Pre-listing Statement")
a forecast was provided for the financial year ending 28 February 2018. The results for the six months ended
31 August 2017 are tracking marginally ahead of the level of performance required to deliver the forecast results
for the full financial year ending 28 February 2018.
Revenue and cost management remains a challenge in difficult economic conditions. The Group has however continued to
benefit from emerging trends in core defensive and niche market segments which, together with a focus on efficiencies
and waste management, has allowed the Group to maintain its level of profitability as is reflected in both the Earnings
Before Interest, Taxation, Depreciation and Amortisation ("EBITDA") and Profit Before Interest and Taxation margins
of the Group, with margins of 11.8% and 8.8% respectively having been reported.
The Group has reported basic earnings of R15.6 million or 12.1 cents per share and headline earnings of R15.8 million
or 12.2 cents per share, this given a weighted average number of shares of 129 070 656 for the period. During the period
under review, the Group repurchased a total number of 16 758 582 shares, which included 14 096 018 shares repurchased
from the Astrapak Limited Linked Unit Trust Scheme and Astrapak Gauteng Proprietary Limited at R0.01 per share, with the
balance of 2 662 564 shares being acquired in the open market at R1.00 per share. At the date of this announcement, all
the repurchased shares have been delisted. This results in an overall reduction of the number of issued shares in the
Company from 135 131 250 at the beginning of the period to 118 372 668.
Despite the payment of a R75.0 million dividend on 12 May 2017 to Astrapak Limited as part of the unbundling, the
Group remained net cash positive over the period and accordingly a net interest income of R0.4 million has been reported.
The Group reported an effective tax rate of 26.0% for the period, the difference to the statutory tax rate of 28% being as
a result of certain permanent differences associated with government incentives. The Group has a total of R42.1 million
in tax losses available for utilisation in future periods and these should be fully utilised based on forecasted levels
of profitability.
The Group generated R25.8 million in cash from operations after working capital changes and has reported a net cash
position of R12.3 million at 31 August 2017. Capital expenditure of R11.9 million was incurred during the period with
a further R6.6 million having been committed as at the reporting date. The Group is currently evaluating a number of
investments to support growth in its chosen markets and existing customer base.
Net Tangible Asset Value per share, calculated by assuming the net number of shares in issue as at 31 August 2017
after adjusting for all repurchases during the period, is R1.39.
PROSPECTS
The Group will continue to focus on the execution of its stated business strategy and look to invest in opportunities
to enhance efficiency and in support of organic growth being led by the existing customer base. Recent interest rate
cuts may eventually result in an increase in consumer spending, which will help to further improve the level of activity
within operations.
The recent storms in oil rich areas of the United States of America have already filtered through to polymer prices
and the industry has seen and been cautioned by suppliers on further potential adverse movements in polymer pricing
in the event of further world-wide supply tightening.
Despite trading conditions remaining challenging due to a weak economic outlook, the Group remains confident that the
exposure to more defensive market segments and a continued focus on operational performance will continue to support and
underwrite its strategic efforts.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
The Group is committed to transformation and achieved a Level 4 (Empowered Supplier) accreditation at its first rating
in accordance with the Codes of Good Practice issued in terms of section 91(1) of the Broad-Based Black Economic
Empowerment Act 53 of 2003 (gazetted 11 October 2013).
CHANGES TO THE BOARD OF DIRECTORS
Appointments:
The following directors were appointed to the Board of Directors of the Company ("the Board") on 13 April 2017:
- Ms P Langeni as Independent Non-Executive Chairman;
- Ms S Ratlhagane as Executive Director, Chief Financial Officer and Company Secretary
- Mr T Mokgatlha as Independent Non-Executive Director;
- Mr G Steffens as Independent Non-Executive Director;
- Mr C McDougall as Independent Non-Executive Director; and
- Mr P Botha as Non-Executive Director.
Mr P Rowse was appointed as alternate director to Mr P Botha on 11 September 2017.
SUBSEQUENT EVENTS
On 11 September 2017 the listing of the 2 662 564 ordinary shares acquired by Master Plastics in terms of a general
authority approved at the general meeting of shareholders held on 7 June 2017 was withdrawn. The number of ordinary
shares in issue has accordingly reduced to 118 372 668.
There are no other subsequent events to be reported upon.
DIVIDEND DECLARATIONS
On 12 May 2017, Master Plastics declared a dividend of R75.0 million to Astrapak Limited, its sole shareholder at the
date of the dividend declaration.
APPROVAL AND PREPARATION
The Condensed Financial Statements presented herein have been prepared under the direction and supervision of the
Chief Financial Officer, Salome Ratlhagane CA (SA).
DOCUMENTS
The Pre-listing Statement and this announcement are available via Master Plastics' website:
http://www.masterplasticsgroup.com, or from the registered office of the Company, or its Corporate and Designated Adviser
Merchantec Proprietary Limited, Monday to Friday 08:30 to 16:30.
ACKNOWLEDGEMENT AND APPRECIATION
The Board would like to express its appreciation to all stakeholders for their continued commitment, efforts and
support.
On behalf of the Board
Manley Diedloff Salome Ratlhagane
Chief Executive Officer Chief Financial Officer
Johannesburg
12 September 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) Notes (R'000) (R'000)
Revenue 9 235 958 9 347
Cost of sales (183 477) (7 382)
Gross profit 52 481 1 965
Administrative and other expenses (17 745) (2 453)
Distribution and selling costs (14 291) (421)
Other items of income and expenditure 254 -
Profit/(loss) from operations 10 20 699 (909)
Investment income 1 077 103
Finance cost (684) (2)
Profit/(loss) before taxation 21 092 (808)
Taxation (expense)/benefit (5 474) 226
Profit/(loss) for the period 15 618 (582)
Other comprehensive loss - -
Total comprehensive profit/(loss) for the period 15 618 (582)
Basic earnings/(loss) per ordinary share (cents) 12 12,1 (13,9)
Diluted earnings/(loss) per ordinary share (cents) 12 12,1 (13,9)
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) Notes (R'000) (R'000)
Profit attributable to ordinary shareholders 15 618 (582)
Headline earnings/(loss) adjustments 154 -
Loss on sale of plant and equipment 214 -
Tax effect of adjustment (60) -
Headline earnings/(loss) attributable
to ordinary shareholders 15 772 (582)
Headline earnings/(loss) per ordinary
share (cents) 12 12,2 (13,9)
Diluted headline earnings/(loss)
per ordinary share (cents) 12 12,2 (13,9)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) Notes (R'000) (R'000)
Assets
Non-current assets 158 366 154 407
Property, plant and equipment 4 150 628 145 759
Deferred taxation asset 7 738 8 648
Current assets 159 632 211 656
Inventories 49 575 46 260
Accounts receivable 83 691 71 214
Cash and cash equivalents 6 26 366 94 182
Assets classified as held-for-sale - 214
Total assets 317 998 366 277
Equity and liabilities
Total equity 8,13 165 037 227 238
Equity attributable to ordinary
shareholders of the parent 165 037 227 238
Non-current liabilities 44 130 43 759
Long-term interest-bearing debt 5 6 662 5 974
Long-term financial liability 7 15 528 15 528
Deferred taxation liabilities 21 940 22 257
Current liabilities 108 831 95 280
Trade and other payables 101 003 87 393
Short-term interest-bearing debt 5 7 379 6 843
Taxation payable 449 1 044
Total equity and liabilities 317 998 366 277
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) Notes (R'000) (R'000)
Opening balance 227 238 -
Comprising:
Ordinary share capital and premium 235 404 -
Common control reserve on acquisition
of equity interests in subsidiaries 8 (7 584) -
Retained loss (582) -
Movements: (62 201) 227 238
Ordinary share capital issued - 235 404
Ordinary share capital repurchased 13 (2 819) -
Common control reserve in acquisition
of equity interests in subsidiaries - (7 584)
Profit/(loss) for the period 15 618 (582)
Dividend paid to parent prior to unbundling (75 000) -
Closing balance 165 037 227 238
Comprising:
Ordinary share capital issued 232 585 235 404
Common control reserve on acquisition
of equity interests in subsidiaries 8 (7 584) (7 584)
Retained loss (59 964) (582)
Total equity 165 037 227 238
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) Notes (R'000) (R'000)
Cash generated from/(utilised by)
operations before working capital changes 27 965 (664)
(Increase)/decrease in working capital (2 182) 2 830
Net interest and taxation paid (5 083) (663)
Dividend paid to parent prior to unbundling (75 000) -
Net cash (outflow)/inflow from operating activities (54 300) 1 503
Capital expenditure (11 921) (1 118)
Acquisition of business - cash balances acquired - 93 797
Net cash (outflow)/inflow from investing activities (11 921) 92 679
Increase in interest-bearing debt 1 224
Repurchase of ordinary shares (2 819)
Net cash outflow from financing activities (1 595) -
Net (decrease)/increase in cash and cash equivalents (67 816) 94 182
Net cash and cash equivalents at beginning
of the period 94 182 -
Net cash and cash equivalents at end of the period 6 26 366 94 182
SEGMENTAL ANALYSIS
Food and
(R'000) Produce Construction Industrial Total Group
Revenue for segment 165 642 34 444 35 872 235 958
Transactions with other
operating segments of the group - - - -
Revenue for external customers 165 642 34 444 35 872 235 958
Profit from operations 17 781 1 633 1 285 20 699
Profit before taxation 18 141 1 628 1 323 21 092
Total assets 217 919 30 314 69 765 317 998
Total liabilities 103 227 30 683 19 051 152 961
Capex 11 468 386 67 11 921
Depreciation 4 617 498 1 937 7 052
Refer note 11 of the notes to the condensed consolidated financial statements.
SUPPLEMENTARY INFORMATION
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) (R'000)
Number of ordinary shares in issue - net of
repurchases ('000) 118 373 135 131
Weighted average number of ordinary shares in
issue over period ('000) 129 071 135 131
Diluted weighted average number of ordinary
shares in issue over period ('000) 129 071 135 131
Net asset value per share (cents) 139 168
Net tangible asset value per share (cents) 139 168
Closing share price (cents) 160 -
Market capitalisation (R million) 189 -
Net interest-bearing cash as percentage of equity (%) 7% 36%
Net cash 12 325 81 365
Long-term interest-bearing debt (6 662) (5 974)
Short-term interest-bearing debt (7 379) (6 843)
Cash and cash equivalents 26 366 94 182
Earnings/(loss) before interest, taxation,
depreciation and amortisation ("EBITDA") 27 751 (664)
Profit/(loss) from operations 20 699 (909)
Depreciation 7 052 245
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The unaudited condensed consolidated financial statements for the six months ended 31 August 2017 have been prepared
in accordance with the Listings Requirements of the JSE Limited ("the JSE Listings Requirements") for interim reports,
and the requirements of the Companies Act, Act no. 71 of 2008, as amended ("the Companies Act") applicable. The JSE
Listings Requirements require interim reports to be prepared and contains the information required in accordance with
IAS34 Interim Financial Reporting and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council. The accounting
policies applied in the preparation of the unaudited condensed consolidated interim financial statements are
consistent with those accounting policies applied in the preparation of the previous consolidated financial
statements. The accounting policies used in the preparation of these results are in accordance with IFRS and are
consistent in all material respects with those used in the audited financial statements for the financial period
ended 28 February 2017.
2. COMPARATIVE FIGURES
As per note 3 below, Master Plastics was only established towards the end of the financial period ended 28 February
2017 and accordingly no comparative figures are presented. The audited consolidated financial statement amounts
for the financial period ended 28 February 2017 have been presented.
3. ESTABLISHMENT OF THE MASTER PLASTICS GROUP
In line with Astrapak Limited's resolved strategy aimed at becoming a focused rigid packaging business and pursuant
to an offer from RPC plc, the board of Astrapak Limited resolved to unbundle Master Plastics to its ordinary shareholders
by way of a distribution in specie in terms of section 46(1)(a)(ii) of the Companies Act and section 46 of the Income
Tax Act. In order to give effect to this and prior to the implementation of the unbundling, Master Plastics was
incorporated and a number of companies and/or assets were disposed of to Master Plastics through a series of
asset-for-share-transactions at the end of January 2017 and February 2017, which resulted in the establishment of the
Master Plastics Group. The Master Plastics Group had accordingly only been in existence for a period of 2 months during
the period ended 28 February 2017.
The "asset-for-share-transactions" and a breakdown of the assets and liabilities so acquired by Master Plastics during
the period ended 28 February 2017 are presented below and are accounted for as a common control transaction in terms of
IFRS.
Audited
Rand value of
shares issued No. of no par value
(R'000) shares issued
Shares and share claims acquired 31 January 2017
(100% voting interest):
- Barrier Film Converters Proprietary Limited 79 650 36 446
- Micawber 430 Proprietary Limited 6 912 8 954
- Micawber 451 Proprietary Limited 6 511 6 746
93 073 52 146
Businesses acquired as at 28 February 2017:
- Peninsula Packaging 75 279 22 277
- Plusnet-Geotex 25 431 22 277
- Property letting enterprises 24 806 16 154
- Astrapak Investments 16 815 22 227
142 331 82 985
235 404 135 131
The following assets and liabilities were acquired by Master Plastics Group as a result of the aforementioned transactions
during the period ended 28 February 2017:
Audited
(R'000)
Properties 22 238
Plant and equipment 122 862
Deferred tax assets 7 938
Inventory 46 133
Trade and other debtors 73 851
Cash and cash equivalents 93 797
Long-term interest-bearing debt (5 974)
Long-term financial liabilities (15 528)
Tax payable (1 766)
Deferred tax liability (21 815)
Trade and other creditors (87 073)
Short-term interest-bearing debt (643)
Net asset value acquired 227 820
Common control reserve 7 584
Share issue 235 404
Cash acquired 93 797
4. PROPERTY, PLANT AND EQUIPMENT
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
('000) (R'000) (R'000)
Opening net carrying value 145 759 -
Additions 11 921 1 118
Additions - restructuring (per note 3) - 145 100
Assets classified as held-for-sale -
excess production equipment - (214)
Depreciation (7 052) (245)
Closing net carrying value 150 628 145 759
Capital expenditure for the period 11 921 1 118
Capital commitments
- contracted not spent 5 536 5 520
- authorised not contracted 1 015 -
5. LONG-TERM AND SHORT-TERM INTEREST-BEARING DEBT
Long-term and short-term interest-bearing debt represent asset based finance liabilities, which are measured
at amortised cost using the effective interest rate method. These are designated as level 2 in the fair
value hierarchy.
6. CASH AND CASH EQUIVALENTS
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
(R'000) (R'000)
Net cash and cash equivalents at the end of the period 26 366 94 182
The movement in cash and cash equivalents during the period is attributable mainly to the R75 million dividend
paid on 12 May 2017 to Astrapak Limited prior to the unbundling.
7. LONG-TERM FINANCIAL LIABILITY
The long-term financial liability of R15.5 million represents the estimated final payment due to the vendor of
Coralline Investments Proprietary Limited. This estimated amount was calculated and based on forecasts at the time
of the transaction in terms of which the minority interest in Coralline Investments Proprietary Limited was acquired
by Astrapak Investments Proprietary Limited. The transaction occurred prior to the disposal of the business to
Master Plastics as part of the restructure. The final amount will be settled upon finalisation of the Group's audited
results for the financial year ended 28 February 2019, which is anticipated to be towards the end of May 2019.
Accordingly, the amount finally due will be calculated based on the agreed valuation formula and the actual results
achieved over the financial years ended 28 February 2017 to 28 February 2019 and could accordingly vary from the
amount of the financial liability currently provided.
8. COMMON CONTROL RESERVE
The common control reserve arose on the acquisition of equity interest by Master Plastics in Barrier Film Converters
Proprietary Limited, Micawber 430 Proprietary Limited and Micawber 451 Proprietary Limited in terms of the
restructure detailed in note 3 and represents the differential between the net asset value acquired and the value
of the shares issued for such net asset value by Master Plastics.
9. REVENUE
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
('000) (R'000) (R'000)
Revenue for the group 243 977 9 347
Transactions with other entities in the group (8 019) -
Revenue for external customers 235 958 9 347
10. PROFIT/(LOSS) FROM OPERATIONS
Profit/(loss) from operations is arrived at after taking the following into account:
Unaudited Audited
six months two-month
ended period ended
31 August 28 February
2017 2017
('000) (R'000) (R'000)
Loss on disposal of plant and equipment 214 -
Depreciation 7 052 245
IFRS 2 Share Appreciation Rights expense 71 -
11. SEGMENTAL ANALYSIS
As the financial period ended 28 February 2017 consisted of only 1 month's trading, mainly attributable to the
business of Barrier Film Converters Proprietary Limited, and due to the timing of the transaction in terms of
which Master Plastics acquired the underlying operations, a segmentation of the financial information reported
for the period ended 28 February 2017 would not be meaningful and has accordingly not been presented.
12. EARNINGS AND HEADLINE EARNINGS PER ORDINARY SHARE - BASIC AND DILUTED
Earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of the parent
by the weighted average number of shares in issue over the period that the attributable profit was generated.
Headline earnings per ordinary share is calculated by dividing the headline earnings attributable to ordinary
shareholders of the parent by the weighted average number of shares in issue over the period that the headline
earnings were generated.
Diluted earnings and diluted headline earnings per ordinary share would be determined by adjusting the weighted
average number of shares in issue over the period to assume conversion of any dilutive ordinary shares. No dilutive
ordinary shares are applicable.
13. SUBSEQUENT EVENTS
On 11 September 2017 the listing of the 2 662 564 ordinary shares acquired by Master Plastics in terms of a general
authority approved at the general meeting of shareholders held on 7 June 2017 was withdrawn. The number of ordinary
shares in issue has accordingly reduced to 118 372 668.
No other facts or circumstances material to the appreciation of this report have occurred between 31 August 2017 and
the date of this report.
Date: 12/09/2017 10:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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