TRANSPACO LIMITED - Reviewed condensed consolidated results for the year ended 30 June 2018 and dividend announcement

Release Date: 22/08/2018 07:05
Code(s): TPC
 
Wrap Text
Reviewed condensed consolidated results for the year ended 30 June 2018 and dividend announcement

Transpaco Limited 
Registration number 1951/000799/06
ISIN: zae000007480
Share code: TPC
(“Transpaco” or “the group”)

Reviewed condensed consolidated results for the year ended 30 June 2018 and dividend announcement

A leading manufacturer, recycler and distributor of plastic and paper packaging products

Highlights
Net asset value per share 1 886 cents 
HEPS UP 13% TO 297,4 cents 
Total dividend per share 135 cents


INTRODUCTION
Transpaco is pleased to present results for the 2018 financial year reflecting a 13,3% increase in headline 
earnings per share. Operating profit grew by 14,4% notwithstanding challenging trading conditions including 
selling price deflation, reduced customer spend and continued stagnant demand for recycled material. 

This increase resulted from stringent cost control, aggressive sales and marketing and sound working 
capital management, further translating into operating margin increasing to 8,1% (June 2017: 7,4%).

On 1 March 2018 Transpaco acquired the Future Packaging group of companies which operates across South Africa 
in the packaging and related products market. Future Packaging distributes its products nationally through 
dedicated branches in Johannesburg, Durban, Cape Town and Bloemfontein. The acquisition will enable Transpaco’s 
existing distribution arm, Transpaco Packaging to expand its product range and geographical footprint. Transpaco 
welcomes Claus Hennings, the managing director and vendor of Future Packaging to Transpaco. We look forward to 
his and the company’s positive contributions to group profits in the future. 

Although the acquisition of Future Packaging contributed towards group operating profit, the benefit was 
offset against non-recurring transactional costs expensed during the year.  

The anti-plastic debate continues and in particular the adverse sentiment towards retail plastic bags. While 
Transpaco is active in this market, our diversification strategy has reduced the group’s dependency on retail 
plastic bags. Transpaco, through it's recycling division, remains South Africa's largest recycler of 
post-consumer polyethylene.

Transpaco is working with government, industry bodies and customers to explore suitable solutions and mitigate 
against any possible negative consequences. Further, we are investigating expanding into several alternative 
products as a substitute for retail plastic bags. 

Notwithstanding the decrease in turnover in the Plastic division primarily due to price deflation, operating 
profits increased in all three divisions. 


FINANCIAL RESULTS
Group                                                June          June             %
                                                     2018          2017      increase
Turnover (R’m)                                   1 721, 9      1 635, 8           5,3
Operating profits (R’m)                             139,2         121,7          14,4
Total comprehensive income (R’m)                     97,5          86,4          12,9
Headline earnings (R’m)                              97,0          86,3          12,4
Earnings per share (cents)                          298,8         262,8          13,7
Headline earnings per share (cents)                 297,4         262,6          13,3
Diluted headline earnings per share (cents)         297,4         262,4          13,3
Net asset value per share (cents)                   1 886         1 708          10,4


The weighted average number of shares in issue in calculating EPS and HEPS was 32 629 000 (June 2017: 32 858 000). 
In total, 431 123 shares held for the Transpaco share incentive scheme were cancelled during the period. Transpaco 
no longer allocates shares for this purpose which has been replaced by a cash incentive bonus scheme.

Cash generated from operations decreased to R125,7 million (June 2017: R204,4 million). Cash and cash equivalents 
at year-end were R60, 4 million (June 2017: R99, 5million). Efficient working capital management minimised net 
interest paid and resulted in Transpaco’s net interest-bearing debt-to-equity position being restricted to 11,6% 
(June 2017: net cash positive) while maintaining a robust balance sheet. The purchase consideration for the 
Future Packaging acquisition was funded by Transpaco’s existing cash resources. Due to the seasonal nature of 
Transpaco trading profile, additional funds were required for working capital funding. The company selected long 
term finance due to favourable lending rates.


Prospects 
The group will continue its proven business strategy, targeting organic growth while maintaining strict 
financial control and at the same time identifying and pursuing appropriate acquisitions.

Transformation
Transpaco’s eighth independent accreditation process in respect of Black Economic Empowerment reflected a 
Level 6 value-added contributor, which was down on previous ratings due to the amendments to the generic 
scorecard. We are addressing this in order to improve our level.

During the year Transpaco focused its transformation initiatives on skills, supplier and enterprise 
development and employment equity. 


Dividend
The board has declared a final gross cash dividend out of income reserves of 90,0 cents per share, resulting in 
total dividends of 135,0 cents per share for the year ended 30 June 2018 (June 2017: 120,0 cents per share). After 
applying the dividend withholding tax of 20%, a net final dividend of 72,00000 cents per share will be paid to 
those shareholders who are not exempt from the dividends tax. The issued shares at the date of declaration are 
32 886 359 ordinary shares.
The Income Tax reference number is 9975/112/71/6.
The salient dates for the dividend are as follows:
Last date to trade shares cum dividend                 Tuesday, 11 September 2018
Shares trade ex dividend                               Wednesday, 12 September 2018
Record date                                            Friday, 14 September 2018
Payment date                                           Monday, 17 September 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 12 September 2018 and Friday, 
14 September 2018, both days inclusive.


Basis of Preparation and Accounting Policies
The group’s annual financial results have been prepared in accordance with the recognition and measurement 
criteria of International Financial Reporting Standards (“IFRS”) issued by the International Auditing 
Standards Board (“IASB”), its interpretations issued by the IFRS Interpretations Committee, the SAICA Financial 
Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued 
by the Financial Reporting Standards Council, the JSE Listings Requirements for provisional reports and the 
Companies Act of South Africa. The principal accounting policies are consistent in all material respects with 
those applied in the preparation of the group’s annual financial statements for the year ended 30 June 2017.The 
group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet 
effective. 

The condensed consolidated financial statements do not include all the information and disclosures required in 
the annual financial statements and should be read in conjunction with the group’s annual financial statements 
for the year ended 30 June 2018. The presentation and disclosure complies with International Accounting Standard 
(“IAS”) 34. The fair value of the assets and liabilities approximate the carrying amounts largely due to the 
short-term maturities of these instruments. Interest-bearing borrowings are not materially different from their 
calculated fair values due to market related rates embedded into the terms of these borrowing.

IFRS 9
There will be a reclassification of financial assets and the measurement of provisions against receivables will 
be revised using the expected loss method, the impact of which is not material. The effective date is 1 July 2018 
and the modified retrospective method will be used.

IFRS 15
Management has assessed the potential impact of IFRS 15 on the financial statements of the group and concluded 
that the group does not sell products based on multiple-element arrangements and it does not sell products on a 
provisional or variable pricing basis and as such IFRS 15 does not have a significant impact on the timing or 
amount of the group’s revenue recognition. The effective date is 1 July 2018 and the modified retrospective 
method will be used. 

Review of Independent Auditors
The group’s auditors Ernst & Young Inc. have reviewed the condensed consolidated financial information for the 
year. The unmodified review report is available for inspection at Transpaco’s registered office. The review was 
performed in accordance with ISRE 2410: Review of Interim Financial Information Performed by the Independent 
Auditor of the Entity. Any reference to future financial performance included in this announcement has not been 
reviewed or reported on by the group’s external auditors.
Approval and Preparation
These condensed consolidated financial results have been prepared under the direction and supervision of the 
Financial Director, L Weinberg CA(SA). 


ON BEHALF OF THE BOARD
DJJ Thomas                        PN Abelheim                L Weinberg
Non-executive Chairman            Chief Executive            Financial Director


NOTE
Acquisition of Future Packaging and Machinery group
On 1 March 2018, Transpaco acquired Future Packaging and Machinery (Pty) Ltd, Future Packaging and Machinery 
Cape (Pty) Ltd and Future Packaging and Machinery KZN (Pty) Ltd. The Future Packaging and Machinery group 
offers innovative and effective solutions with respect to general packaging as well as customised technical 
turnkey projects relating to packaging lines. Branches are strategically positioned throughout South Africa 
to service the local and export market.

The Future Packaging and Machinery group was acquired due to its achievement of consistent growth in sales and
profitability, strong growth prospects and the opportunity to grow the current group’s operations. The purchase 
consideration for the business includes a premium of R41,0 million of which the group believes to be a fair and 
reasonable consideration payable for the impressive business with sound standard operating procedures, scalable 
business model which allows for significant growth through expansion without excessive requirements and 
anticipated earnings enhancement. 

Assets acquired and liabilities assumed
The preliminary fair values of the identifiable assets and liabilities of the Future Packaging and 
Machinery group as at the date of acquisition were: 

R’000                                                  Fair value recognised 
                                                              at acquisition
Assets                                                                      
Property, plant and equipment                                         11 308
Deferred taxation                                                         72
Inventory                                                             46 308
Trade and other receivables                                           69 252
Cash and cash equivalents                                              3 705
                                                                     130 645
Liabilities                                                                 
Interest-bearing borrowings                                            3 180
Trade payables and accruals                                           60 640
Taxation payable                                                       1 531
                                                                      65 351
Total identifiable net assets at fair value                           65 294
Goodwill and intangibles                                              40 986
Purchase consideration transferred                                   106 280
                                                                            
R’000                                               Cash flow on acquisition
Net cash acquired                                                      3 705
Cash paid                                                           (100 276)
Net cash flow on acquisition                                         (96 571)

Consideration transferred
The acquisition of the business was settled by cash resources.

The goodwill and intangibles of R40 986 000 comprises the fair value of expected synergies 
arising from the acquisition. In terms of IFRS 3 - Business Combinations, management will 
perform a final purchase price allocation (“PPA”) to determine the fair value of the assets 
and liabilities acquired. The final PPA exercise will be completed during the course of the 
2019 financial year.                                  



DIRECTORS
DJJ Thomas (Chairman)*; PN Abelheim (Chief Executive); L Weinberg (Financial Director);
HA Bothaˆ; SR Bouzaglou; SI Jacobson*; B Mkhondoˆ; SP van der Linde (Lead Independent Director)ˆ 
*non-executive             ˆindependent non-executive

Date 21 August 2018


STATEMENT OF COMPREHENSIVE INCOME
R’000                                                    Reviewed           %          Audited
                                                        12 months      change        12 months 
                                                        June 2018                    June 2017 
Revenue                                                 1 725 113                    1 639 861 
Turnover                                                1 721 876         5,3        1 635 790 
Cost of sales                                          (1 095 588)                  (1 046 749)
Profit before operating costs 
and depreciation                                          626 288         6,3          589 041 
Operating costs                                          (446 423)                    (422 076)
Depreciation                                              (40 656)                     (45 262)
Operating profit                                          139 209        14,4          121 703 
Finance income                                              3 237                        4 071 
Finance costs                                              (7 404)                      (6 429)
Profit before taxation                                    135 042        13,2          119 345 
Taxation                                                  (37 556)                     (32 986)
Profit for the year                                        97 486                       86 359 
Other comprehensive income                                      -                            - 
Total comprehensive income 
for the year                                               97 486        12,9           86 359 
Weighted average ranking number of 
shares in issue (’000)                                     32 629                       32 858 
Diluted weighted average ranking 
number of shares in issue (’000)                           32 629                       32 883 
Earnings per share (cents)                                  298,8        13,7            262,8 
Diluted earnings per share (cents)                          298,8        13,8            262,6 
Headline earnings per share (cents)                         297,4        13,3            262,6 
Diluted headline earnings per share (cents)                 297,4        13,3            262,4 
Dividend per share (cents)*                                 135,0        12,5            120,0 
*Includes interim dividend of 45 cents (June 2017 - 48 cents) and a dividend declared after the 
period of 90 cents (June 2017 - 72 cents)
Reconciliation of headline earnings (R’000)
Basic earnings                                             97 486                       86 359 
Profit on disposal of property, plant and equipment          (462)                         (65)
Headline earnings                                          97 024        12,4           86 294 


Consolidated statement of changes in equity
R’000                               Share         Share          Other       Distributable           
                                  capital       premium       reserves             reserve           Total
Balance at 30 June 2016               328        11 019          4 005             507 602         522 954 
Profit for the year                     -             -              -              86 359          86 359 
Other comprehensive income              -             -              -                   -               - 
Total comprehensive income              -             -              -              86 359          86 359 
Dividend paid                           -             -              -             (48 088)        (48 088) 
Balance at 30 June 2017               328        11 019          4 005             545 873         561 225 
Profit for the year                     -             -              -              97 486          97 486 
Other comprehensive income              -             -              -                   -               - 
Total comprehensive income              -             -              -              97 486          97 486 
Transfer                                -             -         (4 005)              4 005               - 
Dividend paid                           -             -              -             (38 580)        (38 580) 
Balance at 30 June 2018               328        11 019              -             608 784         620 131 


STATEMENT OF FINANCIAL POSITION                                                  
R’000                                                    Reviewed         Audited 
                                                        12 months       12 months 
                                                        June 2018       June 2017
ASSETS                                                                           
Non-current assets                                        432 831         382 035
 Property, plant and equipment                            347 019         338 406
 Intangibles                                               17 855          17 855
 Goodwill                                                  64 182          23 195
 Deferred taxation                                          3 775           2 579
Current assets                                            649 978         541 469
 Inventories                                              259 846         204 006
 Trade and other receivables                              328 796         237 929
 Taxation receivable                                          888               -
 Cash and cash equivalents                                 60 448          99 534
                                                                                 
TOTAL ASSETS                                            1 082 809         923 504
EQUITY AND LIABILITIES                                                           
Capital and reserves                                      620 131         561 225
 Issued share capital                                         328             328
 Share premium                                             11 019          11 019
 Other reserve                                                  -           4 005
 Distributable reserve                                    608 784         545 873
Non-current liabilities                                   158 362         106 303
 Interest-bearing borrowings                              113 811          65 259
 Deferred income                                           11 053          13 153
 Deferred taxation                                         33 498          27 891
Current liabilities                                       304 316         255 976
 Trade payables and accruals                              250 464         208 813
 Provisions                                                32 145          27 929
 Current portion of interest-bearing borrowings            18 790          16 916
 Deferred income                                            2 103           2 113
 Taxation payable                                             814             205
                                                                                 
TOTAL EQUITY AND LIABILITIES                            1 082 809         923 504
Number of shares in issue (‘000)                                                 
Number of shares (net of treasury shares)                  32 861          32 841
Net movement in treasury shares                                25              20
Ranking number of shares                                   32 886          32 861
Salient features                                                                 
Net asset value per share (cents)                           1 886           1 708
Operating margin %                                            8,1             7,4
Net interest-bearing debt-to-equity ratio %                  11,6        Net cash 
                                                                         positive


CAPITAL COMMITMENTS
  R’000                                                  Reviewed         Audited 
                                                        12 months       12 months 
                                                        June 2018       June 2017 
Capital expenditure authorised and contracted                                     
Property, plant and equipment                              12 812           6 386 


STATEMENT OF CASH FLOWS
R’000                                                                Reviewed         Audited  
                                                                    12 months       12 months  
                                                                    June 2018       June 2017 
Cash flow from operating activities                                                           
 Cash generated from operations                                       125 713         204 387 
 Dividends paid                                                       (38 580)        (48 088)
 Finance income received                                                3 237           4 071 
 Finance costs paid                                                    (7 404)         (6 429)
 Taxation paid                                                        (35 409)        (33 185)
Net cash inflow from operating activities                              47 557         120 756 
Cash flow used in investing activities                                                        
 Proceeds on disposal of property, plant and equipment                  1 418           2 615 
 Acquisition of business                                              (96 571)              - 
 Expansion and replacement of property, plant and equipment           (38 737)       (118 369)
Net cash outflow from investing activities                           (133 890)       (115 754)
Cash flow used in financing activities                                                        
 Proceeds from borrowings                                              66 434          59 929 
 Repayment of borrowings                                              (19 187)        (50 564)
Net cash inflow from financing activities                              47 247           9 365 
Net movement in cash for the year                                     (39 086)         14 367 
Cash and cash equivalents at the beginning of the year                 99 534          85 167 
Cash and cash equivalents at the end of the year                       60 448          99 534 


SEGMENTAL ANALYSIS
R’000                                                         Paper      Properties          
                                             Plastic      and Board       and Group          Total
                                            Products       Products        Services          Group
Turnover - 2018                            1 126 945        594 931               -      1 721 876
Turnover to all customers                  1 182 480        637 172               -      1 819 652
Less turnover to internal customers           55 535         42 241               -         97 776
Turnover - 2017                            1 168 733        467 057               -      1 635 790
Turnover to all customers                  1 215 968        500 084               -      1 716 052
Less turnover to internal customers           47 235         33 027               -         80 262
Operating profit - 2018                       83 980         43 214          12 015        139 209
Operating profit - 2017                       71 403         41 253           9 047        121 703
Profit before tax- 2018                       81 242         42 073          11 727        135 042
Profit before tax - 2017                      68 207         40 250          10 888        119 345
Capital expenditure - 2018                    26 044          7 660           5 033         38 737
Capital expenditure - 2017                    57 424          6 764          54 181        118 369
Assets - 2018                                562 791        365 469         154 549      1 082 809
Assets - 2017                                541 339        185 420         196 745        923 504
Liabilities - 2018                           210 443        134 140         118 094        462 677
Liabilities - 2017                           218 928         92 381          50 970        362 279

Transpaco Limited 
Registration number: 1951/000799/06, 
Share code: TPC, 
ISIN: ZAE000007480 

Auditors 
Ernst & Young Inc. 

Company Secretary 
HJ van Niekerk 

Sponsor 
Investec Bank Limited 

Registered office 
331 6th Street, 
Wynberg, 
Sandton 

Transfer secretaries 
Computershare Investor Services (Pty) Limited,
Rosebank Towers, 
15 Biermann Avenue, 
Rosebank, 
Johannesburg 

Website 
www.transpaco.co.za

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