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KAAP AGRI LIMITED - Trading Update and Voluntary Trading Statement for the Year Ended 30 September 2019

Release Date: 15/11/2019 14:35
Code(s): KAL     PDF:  
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Trading Update and Voluntary Trading Statement for the Year Ended 30 September 2019

KAAP AGRI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2011/113185/06)
ISIN: ZAE000244711
Share code: KAL
(“Kaap Agri” or “the Company”)



TRADING UPDATE AND VOLUNTARY TRADING STATEMENT FOR THE YEAR ENDED
30 SEPTEMBER 2019


Trading update

Despite the slower than anticipated recovery from the drought and the severely stressed consumer
environment we have traded in over the past year, Kaap Agri increased revenue by 29.1% to
approximately R8.5 billion, up from R6.5 billion in the previous financial year with like-for-like
comparable growth of 7.6%. This growth in revenue was driven by a 10.6% increase in the number of
transactions. Product inflation, excluding the impact of fuel inflation, is estimated at 0.2% with fuel
inflation being 6.1%. Gross profit has not grown in relation to revenue growth due to the changing
impact of sales mix, business environment and fuel price fluctuations whilst also experiencing margin
pressure.

The trading results have been hampered by a prolonged impact of drought conditions in certain areas
of the Western and Northern Cape, specifically in the Agri-Retail and Manufacturing divisions. The
subdued retail sector had the largest influence on the Urban Region Agrimarks. Notwithstanding a
below average Q3, we experienced an encouraging uplift in Q4 to end the year strongly from both an
Agri and a Retail perspective. The Wesgraan recovery, off the back of a good 2018 wheat harvest,
realised the anticipated performance improvement. Mechanisation experienced a favourable uptick in
the period under review.

Excluding the impact of KwaZulu-Natal based Partridge Building Supplies (Pty) Ltd (“Forge”) acquired
on 1 October 2018, non-agri retail sales have performed well, growing at 8.6% on the previous
comparable period. With the exception of water storage categories coming off a high base last year as
well as constrained cement sales, non-agri retail sales delivered growth of 15.4%.

Retail fuel expansion continued through selective acquisitions. The Fuel Company grew annual fuel
volumes, inclusive of managed sites awaiting regulatory approval, by 10.4%, with a strong pipeline of
site acquisitions at various stages of conclusion.

Kaap Agri continues to explore Agri, Retail and Fuel expansion opportunities.

The Company’s diversification, ongoing investment and resilience continue to generate strong earnings
growth under the circumstances, with EBITDA increasing by 15.9%.

Voluntary trading statement

Despite the negative impact of the factors mentioned above, earnings grew between 12.9% and 15.2%,
headline earnings grew between 14.0% and 16.3% and recurring headline earnings grew between 6.2%
and 8.3%. This resulted in the below per share earnings ranges:

    -   earnings per share will be between 394.88 cents and 402.86 cents, representing an increase
        of between 12.9% and 15.2% compared to the earnings per share of 349.80 cents per share
        for the financial year ended 30 September 2018;
    -   headline earnings per share will be between 397.72 cents and 405.76 cents, representing an
        increase of between 14.0% and 16.3% compared to the headline earnings per share of 348.98
        cents per share for the financial year ended 30 September 2018; and
    -   recurring headline earnings per share will (as indicated below) be between 373.88 cents and
        381.44 cents, representing an increase of between 6.0% and 7.0% compared to the recurring
        headline earnings per share of 354.10 cents per share for the financial year ended
        30 September 2018.

Once-off items are excluded from headline earnings to calculate recurring headline earnings. These
adjustments relate to non-recurring expenses associated with acquisitions of new businesses, as well
as the revaluation of put options exercisable by non-controlling subsidiary shareholders.
Kaap Agri considers recurring headline earnings to be a key benchmark to measure performance and
to allow for meaningful year-on-year comparison.

Any pro forma financial information in this trading statement is shown for illustrative purposes only, in
order to show how the expected recurring headline earnings per share value range is arrived at, and,
because of its nature, may not fairly present Kaap Agri’s financial position, changes in equity, results of
operations or cash flows.

The pro forma financial effects are presented in accordance with the JSE Limited (“JSE”) Listings
Requirements, the Guide on Pro Forma Financial Information issued by SAICA and the measurement
and recognition requirements of International Financial Reporting Standards. The accounting policies
applied in quantifying pro forma adjustments are consistent with Kaap Agri's accounting policies at
30 September 2018.

Recurring headline earnings per share reconciliation:

                                                                                                   Audited
                                                                        30 September            30 September
                                                                            2019                    2018
                                                                            R'm                      R'm

Headline earnings                                                        283.1 - 288.9              248.4
Attributable to shareholders of the holding company                      279.2 - 284.9              245.7
Non-controlling interest                                                   3.9 - 4.0                  2.7

Non-recurring items                                                      (15.6) - (15.9)              3.6

Recurring headline earnings                                               267.6- 273.0              252.0
Attributable to shareholders of the holding company                      262.5 - 267.8              249.3
Non-controlling interest                                                   5.1 - 5.2                  2.7

Recurring headline earnings per share (cents)                           373.88 - 381.44             354.10



Conclusion

The past two years have been challenging for the Company. However, we believe our growth strategies
and resilience have delivered respectable results given the conditions under which we have traded. We
have continued and accelerated our focus on selective strategic revenue generating expansion and
acquisition opportunities and we remain committed to improving the customer experience and
simplifying our business processes. We believe the business is suitably positioned to take advantage
of an improvement in trading conditions and to execute in terms of our strategic imperatives.

The above financial information is the responsibility of the directors and has not been reviewed or
reported on by the Company’s external auditors.

The Company’s consolidated financial results for the for the year ended 30 September 2019 will be
released on the Stock Exchange News Service of the JSE on or about 28 November 2018.



Paarl

15 November 2019



Sponsor: PSG Capital

Date: 15/11/2019 02:35:00
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