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MPACT LIMITED - COVID-19 impact and trading statement for the six months ending 30 June 2020

Release Date: 23/06/2020 11:39
Code(s): MPT     PDF:  
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COVID-19 impact and trading statement for the six months ending 30 June 2020

Mpact Limited
(Incorporated in the Republic of South Africa)
(Registration number 2004/025229/06)
JSE share code: MPT ISIN: ZAE000156501
("Mpact" or "the Company" or "the Group")

JUNE 2020

For the duration of the nationwide lockdown imposed from 27 March 2020, in response to
the COVID-19 pandemic, all divisions within Mpact were designated as essential service
providers due to Mpact being one of the critical supply chain links in the South African
economy, producing paper and packaging for food, pharmaceuticals and other essential
products. As such, most of Mpact’s facilities have remained operational since the start of the

Mpact’s first priority is to provide and maintain a safe and healthy work environment for all of
its employees. To this end, a comprehensive plan of action with stringent safety and hygiene
practices to mitigate the risks associated with the pandemic has been implemented across
all operations in addition to the strict pre-existing health and safety measures.

Not all the packaging manufactured by Mpact is used for purposes of packaging essential
goods. Consequently, non-essential production lines, such as those producing packaging for
quick-service restaurants and alcoholic beverages, did not operate throughout the lockdown
period. Additionally, the nationwide lockdown has had a negative impact on demand for
other paper and plastics packaging products.

As a result, total sales revenue from continuing operations for the months of April and May
2020 declined by approximately 9% when compared to the same prior year period and total
revenue for the five months ended 31 May 2020 decreased by 3.2%.

Mpact has implemented numerous measures to reduce costs and conserve cash. Cash
reserves are closely managed through, inter alia, monitoring available banking facilities,
debtors’ payments, inventory levels and postponing non-essential capital expenditure. Other
cost initiatives include negotiating reduced rentals, employees agreeing to salary reductions,
reviewing non-essential contracts and temporarily closing production lines, where necessary.

The Group’s debt facility headroom as at 31 May 2020 was approximately R700 million and
the Group is expected to meet its debt facility covenants.

In terms of the Listings Requirements of the JSE Limited, companies are required to publish
a trading statement as soon as they are satisfied that a reasonable degree of certainty exists
that the financial results for the period to be reported on next will differ by 20% or more from
the financial results of the previous corresponding reporting period.

Shareholders are advised that for the six months ending 30 June 2020, Mpact expects
underlying earnings before interest and taxation ("Underlying EBIT") from continuing
operations to be at least 50% lower than the Underlying EBIT for the six months ended 30
June 2019 of R255 million.
Net finance costs for the period are expected to be at least 20% lower than the comparable
prior period due to lower interest rates and lower average net debt.

Mpact’s basic earnings per share ("EPS"), headline earnings per share ("HEPS") and
underlying earnings per shares ("Underlying EPS") from continuing and total operations for
the period are expected to be at least 80% lower than the those reported for the
corresponding six-month period ended 30 June 2019, or at least 45.3 cents per share ("cps")
lower in continuing operations and at least 31.2 cps lower in total operations. The reported
EPS, HEPS and Underlying EPS for the corresponding six-month period ended 30 June
2019 are set out below.

                                             Six months ended
                                                30 June 2019
                                          Continuing      Total
                                          Operations   Operations
                                             cps           cps
EPS                                         57.8          40.2
HEPS                                        56.6          39.0
Underlying EPS                              57.0          39.4

The impact of the ongoing lockdown on the Group’s financial performance remains
uncertain. The Company is therefore not in a position at this stage to provide more specific
guidance on the expected earnings for the interim reporting period ending 30 June 2020. A
further trading statement will be released as soon as the Group has a reasonable degree of
certainty on the expected HEPS and EPS ranges for the current six-month period ending 30
June 2020.

Shareholders are advised that the financial information on which this trading statement is
based has not been reviewed and reported on by the Company’s external auditor.

Melrose Arch
23 June 2020

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 23-06-2020 11:39:00
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