KAP INDUSTRIAL HOLDINGS LIMITED - Unaudited Results For The Six Months Ended 31 December 2017

Release Date: 12/02/2018 11:45
 
Wrap Text
Unaudited Results For The Six Months Ended 31 December 2017

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 2017


HIGHLIGHTS

Revenue from continuing operations up by 29% to R11.5bn
Operating profit from continuing operations up by 25% to R1.4bn
Cash generated from operations before working capital up by 25% to R2bn
Headline earnings per share from continuing operations up by 11%
Net asset value per share up by 9%


OPERATIONAL OVERVIEW

KAP continued to grow through investment in strategically aligned businesses and operations with high barriers to entry, which enhance 
the group’s quality of earnings in respect of sustainability, solid margins and strong cash conversion. The disciplined execution 
of the group’s strategy produced pleasing results for the period.  

The results of the group are reported in three segments as follows:

Diversified industrial

Integrated timber - Forestry and timber manufacturing operations with primary and secondary processing
Automotive components - Manufacture of vehicle accessories and components used in new vehicle assembly
Integrated bedding - Manufacture of foam, fabrics, springs, bases and mattresses

Diversified chemical

Polymers - Manufacture of high-density polyethylene (HDPE), polypropylene (PP) and polyethylene terephthalate (PET)
Resins - Manufacture of urea formaldehyde (UF) resins and impregnated paper

Diversified logistics

Contractual logistics - Specialised contractual supply chain and logistics services
Passenger transport - Personnel, commuter, intercity and tourism transport

Revenue

Diversified industrial - 28%
Diversified chemical - 33%
Diversified logistics - 39%

Operating profit 

Diversified industrial - 37%
Diversified chemical - 27%
Diversified logistics - 36%

Total assets 

Diversified industrial - 37%
Diversified chemical - 34%
Diversified logistics - 29%

Revenue from the diversified industrial segment increased by 4% to R3.4 billion, while the operating profit of the segment increased 
by 14% to R519 million.

The integrated timber division performed well for the period. Recent upgrades to the primary manufacturing plant and the addition 
of value-adding capacity supported revenue growth and enhanced margins through efficiency improvements and operating cost savings. 
The division’s pole operations were negatively impacted by the extended drought in the Western Cape region, while its forestry 
and sawmilling operations both continued to show growth.

Increased market share resulting from recent new model introductions provided strong support to the automotive components division, 
which achieved healthy growth in spite of lower new vehicle assembly volumes for the industry. A major new model introduction was 
successfully commissioned during the period. 

The integrated bedding division benefited from increased industry volumes. The fully integrated model provides for added benefit through 
the division’s sales of both bedding components and complete mattress and base sets. Operating profit growth and margin improvement were 
further supported by the consolidation of the division’s Johannesburg operations and new technology manufacturing equipment commissioned 
during the period.

Revenue from the diversified chemical segment increased by 148% to R3.9 billion, while the operating profit of the segment increased 
by 106% to R385 million.

Safripol performed ahead of expectation for the period. Operations continued to run at capacity, with strong demand for both HDPE 
(high-density polyethylene) and PP (polypropylene). Good progress was made during the period with the integration of this operation 
into the group and on various cost-saving initiatives and margin improvement projects.

The performance of Hosaf was disappointing as a result of several weeks’ delay in the commissioning of a major expansion to its PET 
(polyethylene terephthalate) plant. Revenue, margin and operating profit were negatively affected as a result. The project is nearing 
completion with production ramp-up well advanced. Demand for PET remains strong, which will support the expansion when operating 
at full capacity. 

Woodchem continued to operate at capacity with stable demand for its formaldehyde, resin and impregnated paper products. 

Revenue from the diversified logistics segment increased by 3% to R4.6 billion, while the operating profit of the segment increased 
by 4% to R500 million.

The contractual logistics division performed well for the period in the context of subdued market conditions. Recent management 
appointments and operating structure changes have resulted in a more focused and efficient business. Margins have stabilised in line 
with expectation, while certain key long-term contracts were successfully renewed during the period. Activity levels in all major 
sectors of operation showed improvement. 

The passenger transport division performed well for the period, with the exception of the intercity business, which continued to feel 
the impact of lower passenger numbers and increased competitor activity. The commuter, personnel and tourism businesses showed good growth 
for the period, as did the division’s operations in Mozambique.


FINANCIAL OVERVIEW

These are the interim unaudited results for the six months ended 31 December 2017.

Revenue and operating profit before capital items
Revenue from continuing operations increased by 29% to R11.5 billion (H1:17 R8.9 billion). Operating profit before capital items from 
continuing operations increased by 25% to R1.4 billion (H1:17 R1.1 billion). Operating margin decreased to 12.2% (H1:17 12.6%), primarily 
as a result of the delayed start-up of the Hosaf PET expansion project and the impact thereof on revenue, margin and operating profit.

Headline earnings per share (HEPS)
HEPS from continuing operations increased by 11% to 28.3 cents (H1:17 25.5 cents). 

Tax rate
The effective tax rate decreased to 28.0% (H1:17 29.2%), mainly due to lower withholding taxes in relation to the group’s activities 
in the rest of Africa. 

Working capital
Net working capital increased by R1 018 million to R2 143 million, largely as a result of the acquisition of Safripol effective 
1 January 2017 and elevated inventory levels resulting from the delayed start-up of the Hosaf PET expansion project and port delays 
for related imported product. Inventories increased by R739 million and accounts receivable increased by R887 million, while accounts 
payable increased by R608 million. Normal seasonal investment in working capital took place due to peak trading, which will normalise
leading up to year-end.

Cash flow
Cash generated from operations before working capital changes increased by 24.6% to R2 billion (H1:17 R1.6 billion).

Capital expenditure
Replacement capital expenditure continues to be managed over time in relation to the annual depreciation charge and amounted 
to R486 million for the period (net of proceeds on disposal). Expansion capital expenditure of R483 million resulted from continued 
investment in the group’s asset base to drive growth and efficiency benefits. Capital expenditure was mainly directed towards completion 
of the Hosaf PET expansion project and the purchase of logistics and passenger transport vehicles.

Capital structure
In order to facilitate the various expansion activities of the group while maintaining a healthy capital structure, R1 500 million 
was raised through a fully subscribed rights issue in the prior year (December 2016). This resulted in a 7% increase in the weighted 
amount of shares in issue when comparing H1:18 to H1:17. Net interest-bearing debt increased by R4.8 billion to R7.5 billion as a result 
of the group’s acquisitions and capital investment activities, which took place in the last 18 months. The net debt: EBITDA ratio remains 
at a healthy 2.0 times and the EBITDA: interest cover ratio at 5.7 times, both well within target levels. The debt structure and capacity 
ratios are reflected as follows:

Debt structure and capacity ratios                                                              Six months       Six months
                                                                                                     ended            ended     Year ended
                                                                                                    31 Dec           31 Dec         30 Jun
                                                                                                      2017             2016           2017
                                                                                                        Rm               Rm             Rm
Interest-bearing long-term liabilities                                                               7 648            6 449          7 307
Interest-bearing short-term liabilities                                                                460              527            405
Bank overdrafts and short-term facilities                                                                1              164             74
Cash and cash equivalents                                                                             (649)          (4 523)        (2 009)
Net interest-bearing debt                                                                            7 460            2 617          5 777
EBITDA*                                                                                              1 905            1 559          3 361
Net finance charges*                                                                                   328              197            515
EBITDA: interest cover (times)**                                                                       5.7              8.5            6.5
Net debt: EBITDA (times)**                                                                             2.0              0.9            1.7
*  From continuing operations
** Rolling 12 months 

The following funding activities were concluded during the period in order to facilitate longer dated maturities to accommodate 
future growth:

- R2 004 million raised through bond issuances, with 3 and 5 year tenures.
- R1 750 million of existing term loan facilities settled.
- The KAP bond programme increased from R5 billion to R10 billion.

The recent bond issuances and settlements of term facilities have resulted in an extended debt maturity profile.

Net asset value (NAV) 
The NAV per share increased by 9% to 420 cents from 387 cents.


ACQUISITIONS

The group concluded the following corporate transactions during the period, in accordance with its strategy: 

- Support-a-Paedic (Pty) Ltd and RME Components (Pty) Ltd were acquired effective 1 December 2017 for R48 million, in order to provide 
  the integrated bedding division with access to new markets and bedding brands.

- On 1 December 2017, Southern Star Logistics (Pty) Ltd (a 50% owned subsidiary) was formed in order to facilitate growth in the Swaziland 
  territory. Certain assets from KAP-owned subsidiaries Unitrans Swaziland (Pty) Ltd and Unitrans Agricultural Services (Pty) Ltd were 
  combined with a R92 million contribution of assets from an external party, South Star Investments (Pty) Ltd.

- KAP acquired 45% of minority interests in Crystal Cool Holdings (Pty) Ltd on 1 July 2017 for R10 million, in order to consolidate 
  and streamline operations.

- The disposal of 23% of Feltex Fehrer (Pty) Ltd to the automotive components division’s technology partner, F.S. Fehrer Automotive GmbH, 
  was concluded effective 1 July 2017 for R58 million in terms of a call option.

OUTLOOK

Several acquisitions and major expansionary capital projects were concluded during the 2017 calendar year. Management is focused 
on the successful integration of these acquisitions and on optimising its expanded operations in order to realise full value for capital 
invested. Management remains optimistic that these activities will provide continued growth and momentum to the group and will facilitate 
further expansion in time.

The PG Bison Piet Retief phase one particleboard upgrade in the integrated timber division, the new vehicle model introductions 
in the automotive components division and the new technology investments in the integrated bedding division will be the primary 
drivers of growth for the diversified industrial segment. The expansion of the Hosaf PET facility in the diversified chemical segment 
will enhance revenue, margin and operating profit growth. Recent contract renewals and the pending conclusion of a B-BBEE transaction 
in the contractual logistics division provide a solid platform for continued growth in the diversified logistics segment.

The diverse nature of the group’s operations, with exposure to various sectors, business models and currencies and continued investment 
in organic and acquisitive expansion, underpins the continued growth of the group.


INTERIM DIVIDEND

In line with historic policy the board of directors has not declared an interim dividend.


APPRECIATION

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

On behalf of the board

J de V du Toit                              GN Chaplin                       FH Olivier
Independent non-executive chairman          Chief executive officer          Chief financial officer
12 February 2018


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed consolidated  income statement                           Notes       Six months       Six months
                                                                                    ended            ended                      Year ended 
                                                                              31 Dec 2017      31 Dec 2016                     30 Jun 2017
                                                                                Unaudited        Unaudited*               %        Audited
                                                                                       Rm               Rm           change             Rm
Revenue                                                                            11 478            8 915               29         19 783 
Operating profit before depreciation, amortisation 
and capital items                                                                   1 905            1 559               22          3 361 
Depreciation and amortisation                                                        (501)            (437)                           (862)
Operating profit before capital items                                               1 404            1 122               25          2 499 
Capital items                                                          1              (26)               4                             (34)
Earnings before interest, dividend income, associate 
and joint venture earnings and taxation                                             1 378            1 126               22          2 465 
Net finance charges                                                                  (328)            (197)                           (515)
Share of profit of associate and joint venture companies                               13               10                              15 
Profit before taxation                                                              1 063              939               13          1 965 
Taxation                                                                             (297)            (274)                           (510)
Profit for the period from continuing operations                                      766              665               15          1 455 
Loss for the period from discontinued operations                       2              (14)              (8)                            (62)
Profit for the period                                                                 752              657               14          1 393 
Attributable to:     
Owners of the parent                                                                  720              629               14          1 343 
Non-controlling interests                                                              32               28                              50 
Profit for the period                                                                 752              657               14          1 393 
From continuing and discontinued operations     
Basic earnings per ordinary share (cents)                                            27.0             25.3                7           52.2 
Fully diluted earnings per ordinary share (cents)                                    26.8             25.1                7           51.7 
From continuing operations:       
Basic earnings per ordinary share (cents)                                            27.6             25.6                8           54.6 
Fully diluted earnings per ordinary share (cents)                                    27.4             25.4                8           54.1 


Additional information                                                                          Six months       Six months
                                                                                                     ended            ended     Year ended 
                                                                                               31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited*       Audited
                                                                                                        Rm               Rm             Rm
Note 1: Capital items   
From continuing operations:   
Loss on disposal of property, plant and equipment and investment property                               (7)               -            (36)
Gain on bargain purchase                                                                                 -                4              4 
Impairments                                                                                            (19)               -             (2)
                                                                                                       (26)               4            (34)
From discontinued operations:   
Profit/(loss) on disposal of property, plant and equipment and investment property                       4                -             (1)
Impairments                                                                                              -                -            (34)
                                                                                                         4                -            (35)
                                                                                                       (22)               4            (69)
Note 2: Loss for the period from discontinued operations   
Revenue                                                                                                 37              127            227 
Operating loss before depreciation, amortisation and capital items                                     (17)              (7)           (44)
Depreciation and amortisation                                                                           (4)              (3)            (6)
Operating loss before capital items                                                                    (21)             (10)           (50)
Capital items                                                                                            4                -            (35)
Deficit before interest, dividend income, associate and joint venture 
earnings and taxation                                                                                  (17)             (10)           (85)
Net finance charges                                                                                     (1)              (1)            (3)
Loss before taxation                                                                                   (18)             (11)           (88)
Taxation                                                                                                 4                3             26 
Loss for the period from discontinued operations                                                       (14)              (8)           (62)
Note 3: Headline earnings attributable to ordinary shareholders   
Earnings attributable to owners of the parent                                                          720              629          1 343 
Adjusted for:   
Capital items (note 1)                                                                                  22               (4)            69 
Taxation effects of capital items                                                                       (6)               -            (19)
Non-controlling interests’ portion of capital items (net of taxation)                                    2                1              1 
                                                                                                       738              626          1 394 
Note 4: Headline earnings per ordinary share   
From continuing and discontinued operations   
Headline earnings per ordinary share (cents)                                                          27.7             25.2           54.2 
Fully diluted headline earnings per ordinary share (cents)                                            27.5             25.0           53.6 
From continuing operations:   
Headline earnings per ordinary share (cents)                                                          28.3             25.5           55.6 
Fully diluted headline earnings per ordinary share (cents)                                            28.1             25.3           55.1 
Number of ordinary shares in issue (m)                                                               2 678            2 662          2 662 
Weighted average number of ordinary shares in issue (m)                                              2 664            2 487          2 574 


Condensed consolidated statement of comprehensive income                                        Six months       Six months
                                                                                                     ended            ended     Year ended 
                                                                                               31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited        Audited
                                                                                                        Rm               Rm             Rm
Profit for the period                                                                                  752              657          1 393 
Other comprehensive loss   
Items that may be reclassified subsequently to profit or loss:   
Exchange differences on translation of foreign subsidiaries                                            (21)             (55)           (75)
Total comprehensive income for the period                                                              731              602          1 318 
Total comprehensive income attributable to:   
Owners of the parent                                                                                   700              575          1 269 
Non-controlling interests                                                                               31               27             49 
Total comprehensive income for the period                                                              731              602          1 318 


Condensed consolidated statement of changes in equity                                           Six months       Six months
                                                                                                     ended            ended     Year ended
                                                                                               31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited        Audited
                                                                                                        Rm               Rm             Rm
Balance at beginning of the period                                                                  11 348            8 862          8 862 
Changes in stated share capital   
Net shares issued                                                                                       17            1 456          1 456 
Changes in reserves   
Total comprehensive income for the period attributable to owners of the parent                         700              575          1 269 
Dividends paid                                                                                        (559)            (439)          (442)
Share-based payments                                                                                    30               35             85 
Other reserve movements                                                                                 22                -              -  
Changes in non-controlling interests   
Total comprehensive income for the period attributable to non-controlling interests                     31               27             49 
Dividends paid                                                                                         (46)             (12)           (37)
Shares issued to non-controlling interests                                                              31                -              3 
Shares bought from non-controlling interests                                                            (3)               -              -   
Introduced and acquired on acquisition of subsidiaries                                                   -              104            103 
Balance at end of the period                                                                        11 571           10 608         11 348 
Comprising:   
Stated share capital                                                                                 8 791            8 774          8 774 
Reverse acquisition reserve                                                                         (3 952)          (3 952)        (3 952)
Distributable reserves                                                                               6 074            5 208          5 915 
Share-based payment reserve                                                                            304              234            274 
Other reserves                                                                                          28               30             24 
Non-controlling interests                                                                              326              314            313 
                                                                                                    11 571           10 608         11 348 


Condensed consolidated statement of financial position                                         31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited        Audited
                                                                                                        Rm               Rm             Rm
ASSETS   
Non-current assets   
Goodwill and intangible assets                                                                       5 392            2 204          5 333 
Property, plant and equipment and investment property                                               12 384            9 404         11 832 
Consumable biological assets                                                                         1 926            1 971          1 978 
Investments in associate and joint venture companies                                                    70               74             67 
Investments and loans                                                                                    8                3             11 
Deferred taxation assets                                                                               100               99            130 
Other receivables                                                                                        -                -             40 
                                                                                                    19 880           13 755         19 391 
Current assets   
Inventories                                                                                          2 103            1 364          1 727 
Accounts receivable and other current assets                                                         4 059            3 172          3 652 
Short-term loans receivable                                                                             61                4              3 
Taxation receivable                                                                                    112               50             93 
Cash and cash equivalents                                                                              649            4 523          2 009 
Assets classified as held for sale                                                                      95                -            103 
                                                                                                     7 079            9 113          7 587 
Total assets                                                                                        26 959           22 868         26 978 
EQUITY AND LIABILITIES   
Capital and reserves   
Stated share capital                                                                                 8 791            8 774          8 774 
Reserves                                                                                             2 454            1 520          2 261 
                                                                                                    11 245           10 294         11 035 
Non-controlling interests                                                                              326              314            313 
Total equity                                                                                        11 571           10 608         11 348 
Non-current liabilities   
Interest-bearing long-term liabilities                                                               7 648            6 449          7 307 
Deferred taxation liabilities                                                                        3 067            1 614          2 928 
Other long-term liabilities and provisions                                                             116              130            112 
                                                                                                    10 831            8 193         10 347 
Current liabilities   
Accounts payable, provisions and other current liabilities                                           4 051            3 333          4 736 
Interest-bearing short-term liabilities                                                                460              527            405 
Taxation payable                                                                                        45               43             68 
Bank overdrafts and short-term facilities                                                                1              164             74 
                                                                                                     4 557            4 067          5 283 
Total equity and liabilities                                                                        26 959           22 868         26 978 
Net asset value per ordinary share (cents)                                                             420              387            415 
Net interest-bearing debt to equity (%)                                                                66%              25%            52%


Fair values of financial instruments                                           Fair value       Fair value       Fair value 
                                                                                    as at            as at            as at
                                                                              31 Dec 2017      31 Dec 2016      30 Jun 2017
                                                                                Unaudited        Unaudited          Audited     Fair value
                                                                                       Rm               Rm               Rm      hierarchy
Derivative financial assets                                                             -                2                6        Level 2
Derivative financial liabilities                                                      (67)             (59)             (11)       Level 2

Level 2 financial instruments consist of foreign exchange contracts that 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 foreign exchange 
rates.


Condensed consolidated statement of cash flows                                                  Six months       Six months
                                                                                                     ended            ended     Year ended 
                                                                                               31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited*       Audited
                                                                                                        Rm               Rm             Rm
Operating profit before capital items                                                                1 404            1 122          2 499 
Depreciation and amortisation                                                                          501              437            862 
Operating loss before depreciation, amortisation and capital items from discontinued operations        (17)              (7)           (44)
Net fair value adjustments of consumable biological assets and decrease 
due to harvesting and sale of livestock                                                                 56               (4)            (4)
Other non-cash adjustments                                                                              30               36             28 
Cash generated before working capital changes                                                        1 974            1 584          3 341 
Increase in inventories                                                                               (363)             (74)           (41)
Increase in receivables                                                                               (296)            (296)          (334)
Decrease in payables                                                                                  (836)            (719)            (8)
Changes in working capital                                                                          (1 495)          (1 089)          (383)
Cash generated from operations                                                                         479              495          2 958 
Dividends received                                                                                       -                -             10 
Dividends paid                                                                                        (576)            (452)          (479)
Net finance charges                                                                                   (384)            (225)          (596)
Taxation paid                                                                                         (165)            (120)          (295)
Net cash (outflow)/inflow from operating activities                                                   (646)            (302)         1 598 
Additions to property, plant and equipment and investment property                                    (969)          (1 194)        (2 240)
Acquisition of investments                                                                            (121)            (227)        (3 781)
Other investing activities                                                                             (54)             (25)           (62)
Net cash outflow from investing activities                                                          (1 144)          (1 446)        (6 083)
Net cash outflow from operating and investing activities                                            (1 790)          (1 748)        (4 485)
Net cash inflow from financing activities                                                              436            3 686          3 911 
Net (decrease)/increase in cash and cash equivalents                                                (1 354)           1 938           (574)
Effects of exchange rate translations on cash and cash equivalents                                      (6)             (17)           (19)
Cash and cash equivalents at beginning of period                                                     2 009            2 602          2 602 
Cash and cash equivalents at end of period                                                             649            4 523          2 009 


Segmental analysis                                                             Six months       Six months
                                                                                    ended            ended                      Year ended
                                                                              31 Dec 2017      31 Dec 2016                     30 Jun 2017
                                                                                Unaudited        Unaudited*               %        Audited
                                                                                       Rm               Rm           change             Rm
Revenue from continuing operations     
Diversified industrial                                                              3 363            3 233                4          6 385 
Diversified chemical                                                                3 901            1 575              148          5 467 
Diversified logistics                                                               4 605            4 473                3          8 656 
                                                                                   11 869            9 281               28         20 508 
Intersegment revenue eliminations                                                    (391)            (366)                           (725)
                                                                                   11 478            8 915               29         19 783 
Operating profit before capital items from continuing operations    
Diversified industrial                                                                519              455               14            944 
Diversified chemical                                                                  385              187              106            672 
Diversified logistics                                                                 500              480                4            883 
                                                                                    1 404            1 122               25          2 499 


                                              31 Dec 2017                     31 Dec 2016                       30 Jun 2017
                                                Unaudited                       Unaudited*                          Audited
                                                       Rm              %               Rm                %               Rm              %
Total assets      
Diversified industrial                              9 478             37            9 038               50            9 149             37 
Diversified chemical                                8 854             34            1 982               11            8 354             34 
Diversified logistics                               7 600             29            7 099               39            7 070             29 
                                                   25 932            100           18 119              100           24 573            100 


Reconciliation of total assets per statement of financial position 
to total assets per segmental analysis                                                         31 Dec 2017      31 Dec 2016    30 Jun 2017
                                                                                                 Unaudited        Unaudited*       Audited
                                                                                                        Rm               Rm             Rm
Total assets per statement of financial position                                                    26 959           22 868         26 978 
Less: Investments in associate and joint venture companies                                             (70)             (74)           (67)
Less: Interest-bearing long-term loans receivable                                                        -               (2)            (2)
Less: Deferred taxation assets                                                                        (100)             (99)          (130)
Less: Interest-bearing short-term loans receivable                                                      (1)              (1)            (1)
Less: Taxation receivable                                                                             (112)             (50)           (93)
Less: Cash and cash equivalents                                                                       (649)          (4 523)        (2 009)
Less: Assets classified as held for sale                                                               (95)               -           (103)
Total assets per segmental analysis                                                                 25 932           18 119         24 573 


Geographical information                       Six months                      Six months
                                                    ended                           ended                        Year ended
                                              31 Dec 2017                     31 Dec 2016                       30 Jun 2017
                                                Unaudited                       Unaudited*                          Audited
                                                       Rm              %               Rm                %               Rm              %
Revenue      
South Africa                                       10 400             91            7 911               89           17 978             91 
Rest of Africa                                      1 078              9            1 004               11            1 805              9 
                                                   11 478            100            8 915              100           19 783            100 
Non-current assets      
South Africa                                       18 592             94           12 609               92           18 179             94 
Rest of Africa                                      1 288              6            1 146                8            1 212              6 
                                                   19 880            100           13 755              100           19 391            100 
* Restated to reflect discontinued operations, as well as the new segments in which the group is now structured, i.e. diversified 
  industrial, diversified chemical and diversified logistics. The prior period segmental assets have been restated to more accurately 
  reflect the assets that generate operating profit.


SELECTED EXPLANATORY NOTES

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, the financial 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. The consolidated interim financial information has been prepared 
   using accounting policies that comply with IFRS, which are consistent with those applied in the consolidated financial statements 
   for the year ended 30 June 2017.

2. Basis of preparation
   The condensed consolidated interim financial statements are prepared in millions of South African rand (Rm) on the historical-cost 
   basis, except for certain assets and liabilities, which are carried at amortised cost, and derivative financial instruments and 
   consumable 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 2017 was supervised by Frans Olivier CA(SA), the group’s chief financial officer.

3. Changes to comparative results
   The prior period’s income statement has been restated to reflect the discontinued operations of Glodina, a division of KAP Homeware 
   (Pty) Ltd. The comparative cash flow has been represented to include interest capitalised in accordance with IAS 23: Borrowing Costs, 
   in net finance charges, previously included in additions to property, plant and equipment and investment property. With the acquisition 
   of Safripol in the chemical division, the comparative information in the segmental analysis was restated in the new segments in which 
   the group is now structured, i.e. diversified industrial, diversified chemical and diversified logistics. The prior period segmental 
   operating profit before capital items has been restated by allocating head office costs to the different segments in line with the 
   current period. The segmental assets have also been restated to more accurately reflect the assets that generate operating profit. 
   All of the aforementioned changes have already been applied in the 30 June 2017 results.

4. Accounting policies
   The accounting policies utilised in the preparation of the condensed consolidated interim financial information are consistent with 
   those of the audited consolidated financial statements for the year ended 30 June 2017.

5. 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 12 February 2018.

6. Post-balance sheet events
   No significant events have occurred in the period between the end of the period under review and the date of this report.

7. Changes to the board/board committees
   With effect from 1 October 2017 Mr MJ Jooste and Mr AB la Grange resigned as non-executive directors. On the same date Mr TLR de Klerk 
   and Mr LJ du Preez were appointed as non-executive directors. There were no other changes to the board of directors during the period 
   under review. 


KAP Industrial Holdings Limited (‘KAP’ or ‘the company’ or ‘the group’)
Non-executive directors: J de V du Toit (Chairman)*, KJ Grové (Deputy chairman), TLR de Klerk, LJ du Preez, IN Mkhari*, SH Müller*, 
SH Nomvete*, PK Quarmby*, DM van der Merwe, CJH van Niekerk* 
Executive directors: GN Chaplin (Chief executive officer), FH Olivier (Chief financial officer) 
*Independent

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
www.kap.co.za

Transfer secretaries
Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196

Company secretary
Steinhoff Secretarial Services Proprietary Limited

Auditors
Deloitte & Touche

Sponsor
PSG Capital Proprietary Limited
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