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Unaudited Condensed Consolidated Results for the Six Months Ended 31 August 2018
MASTER PLASTICS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2016/323930/06)
Share code: MAP ISIN: ZAE000242921
("Master Plastics" or "the Company" or "the Group")
Unaudited condensed consolidated results for the six months ended 31 August 2018
COMMENTARY
INTRODUCTION
Master Plastics is involved in the manufacture and provision of specific products and solutions to customers operating
in the agricultural, food, produce, dairy and general industrial markets. Its offering extends beyond traditional
plastic products, also being a market leader in the supply and design of undercover farming nets and structures and
geotextile fibres for concrete reinforcement. The Group will continue to explore opportunities to better service its
chosen end markets and provide a broader range of its customers’ requirements.
EXTERNAL ENVIRONMENT
Our current operating environment is not without significant headwinds, the majority of which are of a macro-economic
nature and not within our control. The on-going land policy debate has had a negative impact on both investment into the
agricultural sector and the exchange rate. The drought experienced in the Western Cape, together with the land policy debate,
led to the agricultural sector being the major contributor to the recession reported in South Africa. The listeria
outbreak towards the end of last year continues to depress both the processed meats and spice markets. These issues have
directly impacted demand during the period and the weakening exchange rate has resulted in significant increases in polymer
input costs which directly impacted working capital investment. Together with a weak economy, an ever-increasing cost of
living and increased taxes, this has resulted in a platform not conducive to trading during the first six months. The
Group expects these factors to continue to exert pressure on the trading performance over the balance of the financial
year.
STATE OF THE BUSINESS
Our focus remains on those elements that are currently within our control. These include our commitment to capital
allocation and cash management disciplines, managing operational costs and efficiencies, maximising utilisation across our
asset base and sustaining a strong financial position. We continue to investigate opportunities to invest in
expansionary and value-enhancing growth to improve overall shareholder returns through the business cycle. During the
reporting period we completed the expansion of the Plusnet-Geotex facility and entered into an exclusive license agreement
with a leading international partner that will see us increase our product offering into our core markets and potentially
expand our business into new markets.
Despite challenging trading conditions, all three of the underlying operations, being Barrier Film Converters
Proprietary Limited, Peninsula Packaging and Plusnet-Geotex (both divisions of Master Plastics) remain profitable and
continue to enjoy a preferred supplier status in many of their chosen market segments.
FINANCIAL RESULTS
Revenue and cost management remains a challenge in difficult economic conditions. Revenue increased by 3.2% to
R 243.6 million (2017: R 236.0 million) due to selling price increases resulting from input polymer price and overhead
recoveries. Volumes declined by 2.0% in relation to the comparative period. Despite the volume decline, an increased
depreciation charge following significant capacity enhancing investments into Plusnet-Geotex and the higher direct labour
costs associated therewith, the Group has maintained its gross profit margin at 21.6% (2017: 22.2%) though improved
efficiencies and cost management disciplines.
Administrative and other expenses of R20.9 million (2017: R 17.7 million) increased by R 4.6 million over that of the
comparative period, having adjusted for the benefit from the fair value adjustment on the long-term financial liability
of R 1.4 million in the current period. This increase is attributable to an increased Share Appreciation Rights expense
of R 1.1 million (2017: R 0.1 million) and R 2.5 million of holding company expenses incurred in the current year not
incurred in the comparative period due to the unbundling of the Group from Astrapak Limited at the end of May 2017.
The balance of the increase is attributable mainly to inflation. Distribution and selling expenses increased by
17.7% to R 16.8 million (2017: R14.3 million) - the increase is attributable to additional warehousing and transport
costs incurred in relation to the plant extension at Plusnet-Geotex and the enhancement of the Group’s sales team with the
appointment of a senior Business Development Manager in the business. There is however scope to improve on current
processes and disciplines in this area of the business and management has introduced measures to better control these costs
going forward.
Gearing, as represented by the ratio of net debt to equity, increased to 22.2% from the level of 0.6% reported at
28 February 2018. The increase in gearing since the financial year end was as a direct result of the R 38.0 million capacity
expansion investment into Plusnet-Geotex during the reporting period and an increased investment in working capital of
R 14.0 million resulting from higher input polymer pricing, strategic stock builds and the timing of debtor collections.
Consequently, a net interest expense of R 1.4 million was incurred during the period in comparison with net interest
income of R 0.4 million during the same period in 2017. It should be noted that Master Plastics also declared
a R 75.0 million dividend during the comparative period to Astrapak Limited and concluded a further R 4.1 million in share buy
backs during the second half of the last financial year which results in the net interest expense and income numbers not being
directly comparable.
The effective tax rate of the Group reported is 24.8% (2017: 26.0%) with the difference to the statutory tax rate of
28% being due to certain permanent differences associated with government incentives and the fair value adjustment on the
long-term financial liability. The Group has a total of R 32.1 million (2017: R 42.1 million) in tax losses available
for utilisation in future periods and these should be fully utilised based on forecasted levels of profitability.
The Group has reported basic earnings and headline earnings of R 10.1 million or 8.6 cents per share. Basic earnings
and headline earnings of R 15.6 million or 12.1 cents per share and R 15.8 million or 12.2 cents per share respectively,
were reported in the comparative period.
The Group did not declare any dividends and did not conclude any share repurchases during the period. The issued
number of shares in the Company remained at 117 535 232.
The Group generated R 24.1 million (2017: R 28.0 million) in cash from operations before working capital changes. The
investment in working capital increased by R14.0 million from 28 February 2018 with R 7.7 million directly attributable
to higher input polymer costs and R 3.2 million to strategic stock builds whilst the balance is associated with the
timing of debtor receipts which only occurred post the reporting date.
Capital expenditure of R 41.5 million was incurred during the period with a further R 9.1 million having been
committed as at the reporting date.
Net Tangible Asset Value per share is R 1.66 (2017: R 1.39) in comparison with R 1.57 as reported at 28 February 2018.
PROSPECTS
The pressures from the external factors will continue to impact business performance for the balance of the
financial year. The Group will however continue to focus on the execution of its stated business strategy and look to
explore and invest in opportunities to increase utilisation, enhance efficiency and to support organic, expansionary and
value-adding growth.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
The Group is committed to transformation and achieved a Level 2 (Empowered Supplier) rating in accordance with the
Codes of Good Practice issued in terms of section 91(1) of the Broad-Based Black Economic Empowerment Act 53 of 2003
(gazetted 11 October 2013).
SUBSEQUENT EVENTS
On 17 September 2018 Plusnet-Geotex (a division of Master Plastics Limited) was issued with a notice of strike in
terms of section 64 of the Labour Relations Act. The strike which relates to a wage dispute, will accordingly commence
on 19 September 2018.
There are no other subsequent events to be reported upon.
DIVIDEND DECLARATIONS
No dividend has been declared for the period.
APPROVAL AND PREPARATION
The Condensed Financial Statements presented herein have been prepared under the direction and supervision of the
Chief Financial Officer, Salome Ratlhagane CA (SA).
DOCUMENTS
This announcement is available via Master Plastics’ website: www.masterplasticsgroup.com, or from the registered
office of the Company, or its Corporate and Designated Adviser Merchantec Capital, Monday to Friday 08:30 to 16:30.
ACKNOWLEDGEMENT AND APPRECIATION
The Board would like to express its appreciation to all stakeholders for their continued commitment, efforts and
support.
On behalf of the Board
Manley Diedloff Salome Ratlhagane
Chief Executive Officer Chief Financial Officer
Johannesburg
18 September 2018
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
Notes 2018 2017 2018
Revenue 9 243 610 235 958 504 479
Cost of sales (191 010) (183 477) (386 249)
Gross profit 52 600 52 481 118 230
Administrative and other expenses (20 917) (17 745) (39 293)
Distribution and selling costs (16 821) (14 291) (29 834)
Other items of income and expenditure - 254 -
Profit from operations 10 14 862 20 699 49 103
Investment income 148 1 077 1 211
Finance cost (1 592) (684) (1 499)
Profit before taxation 13 418 21 092 48 815
Taxation expense (3 330) (5 474) (12 460)
Profit for the period 10 088 15 618 36 355
Other comprehensive profit/(loss) - - -
Total comprehensive profit for the period 10 088 15 618 36 355
Basic earnings per ordinary share (cents) 11 8,58 12,10 29,46
RECONCILIATION OF HEADLINE EARNINGS
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
Note 2018 2017 2018
Profit attributable to ordinary shareholders 10 088 15 618 36 355
Headline earnings adjustment 6 154 55
Loss/(profit) on sale of plant and equipment 9 214 (300)
Impairment of plant and equipment - - 377
Tax effect of adjustments (3) (60) (22)
Headline earnings attributable to ordinary
shareholders 10 094 15 772 36 410
Headline earnings per ordinary share (cents) 11 8,59 12,22 29,51
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
Notes 2018 2017 2018
Assets
Non-current assets 184 384 158 366 153 525
Property, plant and equipment 3 179 773 150 628 148 216
Deferred taxation assets 4 611 7 738 5 309
Current assets 173 118 159 632 174 407
Inventories 63 058 49 575 59 962
Trade and other receivables 3 100 384 83 691 97 917
Cash and cash equivalents 6 7 400 26 366 15 985
Taxation asset 2 276 - 543
Assets classified as held-for-sale 4 9 449 - 8 985
Total assets 366 951 317 998 336 917
Equity and liabilities
Total equity 194 600 165 037 184 512
Equity attributable to ordinary
shareholders of the parent 8 194 600 165 037 184 512
Non-current liabilities 69 786 44 130 44 057
Long-term interest-bearing debt 5 36 018 6 662 9 117
Long-term financial liability 7 14 182 15 528 15 528
Deferred taxation liabilities 19 586 21 940 19 412
Current liabilities 102 565 108 831 108 348
Trade and other payables 3 87 969 101 003 100 289
Short-term interest-bearing debt 5 14 596 7 379 8 059
Taxation payable - 449 -
Total equity and liabilities 366 951 317 998 336 917
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
Note 2018 2017 2018
Opening balance 184 512 227 238 227 238
Comprising:
Ordinary share capital 231 323 235 404 235 404
Common control reserve on acquisition
of equity interests in subsidiaries 8 (7 584) (7 584) (7 584)
Retained loss (39 227) (582) (582)
Movements: 10 088 (62 201) (42 726)
Ordinary share capital repurchased - (2 819) (4 081)
Profit for the period 10 088 15 618 36 355
Dividend paid to parent prior to unbundling - (75 000) (75 000)
Closing balance 194 600 165 037 184 512
Comprising:
Ordinary share capital 231 323 232 585 231 323
Common control reserve on acquisition
of equity interests in subsidiaries 8 (7 584) (7 584) (7 584)
Retained loss (29 139) (59 964) (39 227)
Total equity 194 600 165 037 184 512
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Restated* Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
Note 2018 2017 2018
Cash generated from operations before
working capital changes 24 057 27 965 66 041
Increase in working capital (13 968) (2 182) (23 253)
Net interest and taxation paid (5 635) (5 083) (13 841)
Dividend paid to parent prior to unbundling - (75 000) (75 000)
Net cash inflow/(outflow) from operating activities 4 454 (54 300) (46 053)
Additions to property, plant and equipment (3 174) (6 312) (13 239)
Payment of contingent purchase consideration - - (6 224)
Proceeds on disposal of plant and equipment 141 - 300
Net cash outflow from investing activities (3 033) (6 312) (19 163)
Repayment of interest-bearing debt (10 066) (4 385) (8 900)
Repurchase of ordinary shares - (2 819) (4 081)
Net cash outflow from financing activities (10 066) (7 204) (12 981)
Net decrease in cash and cash equivalents (8 585) (67 816) (78 197)
Net cash and cash equivalents at beginning
of the period 15 985 94 182 94 182
Net cash and cash equivalents at end
of the period 6 7 400 26 366 15 985
*Restated for the cash flow treatment relating to assets purchased in terms of instalment sales agreement.
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
A segmentation of the financial information for the six months ended 31 August 2018 with 31 August 2017 comparatives
is presented below:
(R’000) Food
& Produce Construction Industrial Total Group
Revenue for segment 2018 172 139 31 905 39 566 243 610
2017 165 642 34 444 35 872 235 958
Revenue for external customers 2018 172 139 31 905 39 566 243 610
2017 165 642 34 444 35 872 235 958
Profit from operations 2018 13 412 362 1 088 14 862
2017 17 781 1 633 1 285 20 699
Profit before taxation 2018 11 959 217 1 242 13 418
2017 18 141 1 628 1 323 21 092
Total assets 2018 245 448 52 135 69 368 366 951
2017 217 919 30 314 69 765 317 998
Total liabilities 2018 122 456 37 016 12 879 172 351
2017 103 227 30 683 19 051 152 961
Capex 2018 37 808 3 467 178 41 453
2017 11 468 386 67 11 921
Depreciation 2018 6 618 638 2 026 9 282
2017 4 617 498 1 937 7 052
SUPPLEMENTARY INFORMATION
Audited
Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
2018 2017 2018
Number of ordinary shares in issue - net
of repurchases (‘000) 117 535 118 373 117 535
Weighted average number of ordinary shares in
issue over period (‘000) 117 535 129 071 123 399
Net asset value per share (cents) 166 139 157
Net tangible asset value per share (cents) 166 139 157
Closing share price (cents) 140 160 165
Market capitalisation (R million) 165 189 194
Net interest-bearing debt/(cash) as percentage
of equity (%) 22,2% (7%) 0,6%
Net interest-bearing (debt)/cash (43 214) 12 325 (1 191)
Long-term interest-bearing debt (36 018) (6 662) (9 117)
Short-term interest-bearing debt (14 596) (7 379) (8 059)
Cash and cash equivalents 7 400 26 366 15 985
Return on average capital employed (ROCE) 5,9% 9,6% 20,2%
Normalised Earnings before interest, taxation,
depreciation and amortisation ( Normalised EBITDA”)**
23 905 28 036 65 291
Profit/(loss) from operations 14 862 20 699 49 103
Depreciation 9 282 7 052 14 893
Earnings/(loss) before interest, taxation, depreciation
and amortisation ( EBITDA”) 24 144 27 751 63 996
Loss/(profit) on sale of plant and equipment 9 214 (300)
Fair value adjustment on long-term financial liability (1 346) - -
Impairment of plant and equipment - - 377
IFRS 2 Share Appreciation Rights Expense 1 098 71 1 218
Normalised EBITDA margin 9,8% 11,9% 12.9%
Normalised Profit from operations** 14 623 20 984 50 398
Normalised Profit from operations margin 6,0% 8,9% 10,0%
** Normalised EBITDA and Normalised Profit from Operations are determined by adjusting the reported EBITDA and
Profit from operations numbers for those items deemed to be non-recurring, capital in nature or in view of the
Company distorts the reporting of the sustainable profitability of the Group. The adjustables used in determining
the Normalised Profit from operations are the same as those used for purposes of determining the Normalised EBITDA.
NOTES TO THE CONDENSED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The condensed unaudited consolidated financial statements are 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, Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Council, as well as the requirements of the Companies Act of South Africa and the JSE
Limited’s Listings Requirements. The condensed audited consolidated financial statements also contain, at a minimum the
information required by International Accounting Standard 34 Interim Financial Reporting. The accounting policies used in
the preparation of these results are in accordance with IFRS and are consistent in all material respects with those used in
the audited consolidated and separate financial statements for the financial year ended 28 February 2018. Standards and
interpretations that were effective, being IFRS 15 and IFRS 9, were adopted.
2. COMPARATIVE FIGURES
The condensed unaudited consolidated financial statements for the six months ended 31 August 2017 and the condensed
audited results for the financial year ended 28 February 2018 have been presented.
3. PROPERTY, PLANT AND EQUIPMENT
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
2018 2017 2018
Opening net carrying value 148 216 145 759 145 759
Additions 40 989 11 921 26 252
Disposals (150) - -
Assets classified as held-for-sale -
properties excess to requirements - - (8 739)
Impairment of item of machinery due to redundancy - - (163)
Depreciation (9 282) (7 052) (14 893)
Closing net carrying value 179 773 150 628 148 216
Capital expenditure for the period 40 989 11 921 26 252
Capital commitments
- contracted not spent 9 144 5 536 33 316
- authorised not contracted - 1 015 -
A total of R 1.3 million of the contracted but not yet spent total above has been paid by the finance provider in the
form of progress payments made to suppliers of equipment. The Group has accordingly recognised both an asset and a
corresponding liability as part of Trade and other receivables and Trade and other payables for this amount.
4. ASSETS HELD-FOR-SALE
The assets held-for-sale relate to assets that are
being disposed of:
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
2018 2017 2018
Opening balance at the beginning of the period 8 985 214 214
Property* 464 - 246
Property transferred from property, plant and equipment - - 8 739
Assets previously held-for-sale now impaired - (214) (214)
Assets held-for-sale at the end of the period 9 449 - 8 985
*Property additions capitalised to assets held-for-sale
Assets held-for-sale at end of the period represent land and buildings which are deemed excess to requirements by the
Group. Management is committed to a plan to sell the asset and has actively marketed the property for sale at a price
that is reasonable in relation to the property’s current fair value. An independent broker has been appointed to market
the properties on the Group’s behalf.
5. LONG-TERM AND SHORT-TERM INTEREST-BEARING DEBT
Long-term and short-term interest-bearing debt represent asset-based finance liabilities which are measured at
amortised cost using the effective interest rate method.
6. CASH AND CASH EQUIVALENTS
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
2018 2017 2018
Bank balances 7 400 26 366 15 985
7. LONG-TERM FINANCIAL LIABILITY
Long-term financial liability 14 182 15 528 15 528
The long-term financial liability, reflected at fair value, represents the estimated final payment that will be due to
the vendor of Coralline Investments Proprietary Limited. This estimated amount was re-calculated at the end of
28 February 2018 and 31 August 2018 based on the actuals for the February 2017 and February 2018 financial years and the
forecast for the financial year ending 28 February 2019. The decrease in the long-term financial liability is attributed
to the lower than anticipated trading levels over the period. The original transaction occurred prior to the disposal of the
Plusnet-Geotex business to Master Plastics by Astrapak Limited in preparation of the unbundling. The final amount will be
determined upon finalisation of the Group audited results for the financial year ended 28 February 2019, which is
anticipated to be towards the end of May 2019. The amount finally due will therefore be re-calculated based on the agreed
valuation formula and the actual results achieved over the financial years ended 28 February 2017 to 28 February 2019 and
could accordingly still vary from the amount of the financial liability currently reported. The final amount due will be
settled over 2 financial years, with 70% being settled in May 2019 and the balance on 28 February 2021. The long-term
financial liability is classified as a level 3 fair value in terms of the fair value hierarchy and has been discounted to
its present value at a rate of 10%.
8. COMMON CONTROL RESERVE
The common control reserve arose on the acquisition of equity interest by Master Plastics in Barrier Film Converters
Proprietary Limited, Micawber 430 Proprietary Limited and Micawber 451 Proprietary Limited in terms of the restructure
detailed in note 3 and represents the differential between the net asset value acquired and the value of the shares issued
for such net asset value by Master Plastics, which value represented the carrying value in the books of the parent.
9. REVENUE
Revenue for the group 253 835 243 977 529 089
Transactions with other entities in the group (10 225) (8 019) (24 610)
Revenue for external customers 243 610 235 958 504 479
10. PROFIT FROM OPERATIONS
Audited
(R’000) Unaudited Unaudited financial
six months ended six months ended year ended
31 August 31 August 28 February
2018 2017 2018
Profit from operations has been determined
after taking the following items into account:
(Loss)/profit on disposal of plant and equipment (9) (214) 300
Auditors remuneration 536 491 811
Depreciation 9 282 7 052 14 893
Staff costs 48 031 43 218 87 239
Rental expense 4 654 4 489 9 230
Fair value adjustment on long-term financial liability (1 346) - -
Foreign exchange (gains)/ losses realised (15) 85 313
Impairment of machinery due to redundancy - - 377
IFRS 2 Share Appreciation Rights Expense 1 098 71 1 218
11. BASIC EARNINGS PER ORDINARY SHARE AND HEADLINE EARNINGS PER ORDINARY SHARE
Basic earnings per ordinary share is calculated by dividing the profit attributable to ordinary shareholders of Master
Plastics by the weighted average number of shares in issue over the period that the attributable profit or loss was
generated.
Headline earnings per ordinary share is calculated by dividing the headline earnings attributable to ordinary
shareholders of the parent by the weighted average number of shares in issue over the period that the headline earnings were
generated.
12. SUBSEQUENT EVENTS
On 17 September 2018 Plusnet-Geotex (a division of Master Plastics Limited) was issued with a notice of strike in
terms of section 64 of the Labour Relations Act. The strike which relates to a wage dispute, will accordingly commence on
19 September 2018.
The Board is not aware of any other facts or circumstances material to the appreciation of this report that may have
occurred between 31 August 2018 and the date of this report.
Date: 18/09/2018 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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