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
Date: 22/08/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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