| Fri 7 Sep 2007, 16:41 | | KAP - KAP International Holdings Limited - Audited |
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KAP
KAP
KAP - KAP International Holdings Limited - Audited Group Results And Final
Distribution Declaration For The Eighteen Months Ended 30 June 2007
KAP INTERNATIONAL HOLDINGS LIMITED
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000059564
Audited group results and final distribution declaration for the eighteen
months ended 30 June 2007
HIGHLIGHTS
STRONG CASH FLOWS FROM OPERATING ACTIVITIES
HEADLINE EARNINGS OF 35,5 CENTS FOR THE 12 MONTHS
ACQUISITION OF BRENNER MILLS COMPLETE
HOSAF PET EXPANSION PROJECT ANNOUNCED
CONDENSED INCOME STATEMENTS
31 Dec
30 June 30 June 30 June 2005
2007 2007 2006 12 months
18 months 12 months 12 months Restated,
Audited Unaudited Unaudited audited
Rm Rm Rm Rm
Revenue 5 242,2 3 673,5 3 127,5 2 975,1
Operating profit 338,5 239,5 247,5 225,5
Pension fund surplus (net) - - 50,6 50,6
Discontinued operation
closure cost - - (10,9) (10,9)
Net finance costs (51,1) (40,7) (21,5) (19,4)
Share of results of
joint ventures 3,2 2,0 0,8 0,7
Profit before taxation 290,6 200,8 266,5 246,5
Taxation (53,0) (39,7) (48,1) (45,6)
Net profit for the
period 237,6 161,1 218,4 200,9
- continuing operations 237,6 161,1 231,3 213,8
- discontinued
operations - - (12,9) (12,9)
Net profit for the
period
- attributable to KAP
shareholders 226,0 153,5 210,4 194,7
- attributable to
minorities 11,6 7,6 8,0 6,2
Including discontinued
operations
Earnings per share (cents) 53,3 36,2 49,6 46,2
Excluding discontinued
operations
Earnings per share (cents) 53,3 36,2 52,7 49,3
Reconciliation of
headline earnings
Net profit - ordinary
shareholders 226,0 153,5 210,4 194,7
Profit on sale of
property, plant and
equipment (5,9) (5,5) (12,3) (12,0)
Impairments 2,6 2,6 0,6 0,6
Discontinued operation
closure cost - - 9,5 9,5
Headline earnings 222,7 150,6 208,2 192,8
Weighted average shares
in issue (m) 424,1 424,5 423,9 421,5
Including discontinued
operations
Headline earnings per
share (cents) 52,5 35,5 49,1 45,7
Excluding discontinued
operations
Headline earnings per
share (cents) 52,5 35,5 52,2 48,8
Distribution per share
(cents) 17 17 12 12
CONDENSED BALANCE SHEETS
31 Dec 2005
30 June 2007 Restated,
Audited audited
Rm Rm
Assets
Non-current assets 915,1 696,2
Property, plant and equipment and
investment properties 709,1 529,5
Goodwill 56,4 -
Investments and loans 36,2 26,6
Pension fund surplus 45,5 45,0
Deferred taxation 67,9 95,1
Current assets 1 474,6 1 052,1
Inventories and biological assets 789,8 535,3
Receivables and prepayments 682,4 514,6
Cash and cash equivalents 2,4 2,2
Total assets 2 389,7 1 748,3
Equity and liabilities
Equity 1 191,1 1 055,2
Equity holders` interest 1 166,1 1 041,2
Minority interest 25,0 14,0
Non-current liabilities 114,5 118,8
Long-term borrowings - interest-bearing 71,4 75,5
Long-term borrowings - interest-free - 5,9
Retirement benefit obligations 14,0 19,8
Deferred taxation 29,1 17,6
Current liabilities 1 084,1 574,3
Short-term borrowings - interest-bearing 73,3 46,9
Short-term borrowings - interest-free 18,0 3,8
Trade and other payables 580,6 371,0
Provisions 37,9 39,7
Bank overdrafts 374,3 112,9
Total equity and liabilities 2 389,7 1 748,3
Number of shares in issue (millions) 424,5 423,3
Net asset value per share (c) 274,5 246,0
Net interest-bearing debt to equity (%) 43,4% 22,1%
CONDENSED CASH FLOW STATEMENTS
30 June 2007 31 Dec 2005
18 months 12 months
Audited Restated, audited
Rm Rm
Cash flows from operating activities 154,2 110,5
Cash generated from operations before
working capital changes 397,2 218,5
Net working capital changes (177,9) (85,5)
Cash generated from operations 219,3 133,0
Net finance costs (51,1) (19,4)
Taxation paid (14,0) (3,1)
Cash flows from investing activities (219,5) (139,1)
Purchase of property, plant and equipment
- expansion (127,8) (139,2)
- replacement (54,6) (26,0)
Other investing activities 17,3 26,1
Acquisition of subsidiaries, net of cash
acquired (54,4) -
Cash flows from financing activities (195,9) (81,8)
Decrease in borrowings (85,1) (73,1)
Distributions to shareholders (110,2) (7,1)
Dividends to minorities (0,6) (1,6)
Net decrease in cash and equivalents (261,2) (110,4)
Opening cash and cash equivalents (110,7) (0,3)
Closing cash and cash equivalents (371,9) (110,7)
CONDENSED STATEMENTS OF CHANGES IN EQUITY
30 June 2007 31 Dec 2005
18 months 12 months
Audited Restated, audited
Rm Rm
Balance at the beginning of the period 1 055,2 863,6
Prior period adjustments - (1,7)
Balance at the beginning of the period
restated 1 055,2 861,9
Shares issued during the period 4,8 13,8
Movement in share-based payment reserve 4,2 1,1
Movement in foreign currency translation
reserve 0,1 -
Net profit for the period 237,6 200,9
Distributions to minorities (0,6) (1,6)
Distributions to KAP shareholders (110,2) (20,9)
Balance at the end of the period 1 191,1 1 055,2
KAP shareholders 1 166,1 1 041,2
Minorities 25,0 14,0
ACQUISITION OF SUBSIDIARIES
Carrying Fair
value value
Rm Rm
Non-current assets 92,6 78,5
Current assets 124,5 121,6
Non-current liabilities (89,3) (86,2)
Current liabilities (111,4) (115,3)
Net assets/(liabilities) acquired 16,4 (1,4)
Due to differing year-ends, it is not practicable to determine the revenue and
profit after tax of the combined entities for the 18-month period ended 30
June
2007.
The acquisition of Brenner Mills (Pty) Ltd is determined on a provisional
basis, as the fair value of assets and liabilities has not yet fully been
determined.
The total consideration was R55,0 million, of which R4,8 million was settled
by
an issue of shares.
SEGMENTAL ANALYSES
Operating
Revenue profit Depreciation
Rm Rm Rm
2007 (18 months
audited)
Industrial 3 027,4 246,7 50,2
Consumer 2 214,5 93,5 14,7
Other 0,3 (3,8) 0,7
Intra-group - 2,1 -
Total 5 242,2 338,5 65,6
2005 (12 months
restated, audited)
Industrial 1 792,4 160,2 32,6
Consumer 1 180,9 54,0 9,2
Other 1,8 20,8 0,4
Intra-group - (9,5) -
Total 2 975,1 225,5 42,2
June 2007 (12 months
unaudited)
Industrial 2 103,5 178,4 32,6
Consumer 1 569,8 61,1 9,6
Other 0,2 - 0,5
Total 3 673,5 239,5 42,7
June 2006 (12 months
unaudited)
Industrial 1 832,6 175,7 35,7
Consumer 1 294,0 71,8 9,4
Other 0,9 - 0,5
Total 3 127,5 247,5 45,6
Capital
Assets Liabilities expenditure
Rm Rm Rm
2007 (18 months
audited)
Industrial 1 567,6 693,0 135,3
Consumer 918,7 341,6 46,8
Other 21,7 256,3 0,3
Intra-group (118,3) (96,3) -
Total 2 389,7 1 194,6 182,4
2005 (12 months
restated, audited)
Industrial 1 238,2 480,2 132,5
Consumer 617,8 149,4 30,9
Other 24,7 101,2 1,8
Intra-group (132,4) (43,0) -
Total 1 748,3 687,8 165,2
NOTES
30 June 2007 31 Dec 2005
18 months 12 months
Audited Restated, audited
Rm Rm
1. Net finance costs 51,1 19,4
Interest received (0,7) (8,0)
Interest paid 51,8 27,4
2. Capital expenditure commitments 201,2 33,3
Contracted 29,8 10,3
Approved but not yet contracted 171,4 23,0
The bulk of the increase relates to
approval for the Hosaf expansion
project (R97,7 million).
3. Operating lease commitments 23,9 16,0
4. Guarantees and contingent liabilities 5,8 9,1
5. Adoption of Circular 9/2006
The group has adopted Circular 9/2006 (Transactions giving rise to
revenue/purchases adjustments), and the 2005 results have been restated
accordingly.
6. Taxation
Taxation remains low in relation to reported profits mainly due to non-taxable
income.
7. Basis of preparation of the results
The condensed audited results of the group for the eighteen months ended
30 June 2007 have been prepared in accordance with the accounting policies of
the group, which comply with International Financial Reporting Standards
(IFRS),
and the presentation and disclosure requirements of IAS 34 (Interim Financial
Reporting). Certain prior period adjustments (2005 earnings effect (0,4)
cents)
have been made in relation to biological assets and the effects of
Circular 9/2006, and prior periods have been restated accordingly. Diluted
earnings per share is not disclosed as the share options are anti-dilutive.
8. Audited results
The results for the 18 months ended 30 June 2007 have been audited by
Deloitte & Touche. Their unmodified audit opinion is available for inspection
at the registered office of the company.
REVIEW OF RESULTS
The board of directors reports on the results for the 18 months ended
30 June 2007. Operating profit (excluding the pension fund surplus) grew by 5%
for the twelve months to June 2007 ("2006/7") compared to the twelve months to
June 2006 ("2005/6"), despite significantly lower margins in Bull Brand Foods
caused by adverse market conditions. Headline earnings per share decreased
from 49,1 cents to 35,5 cents due also to 11,8 cents relating to the once-off
pension fund surplus included in 2005/6.
Revenue for 2006/7 increased by 17% from R3,1 billion to R3,7 billion due to
double-digit growth in all operations and the inclusion of R121 million of
revenue from Brenner Mills. The improved performance of the leather operations
and solid results of the other divisions compensated for the lower Bull Brand
results.
Balance sheet and cash flow
An increased interest-bearing debt-to-equity ratio of 43% reflects the
incremental debt assumed on the acquisition of Brenner Mills as well as
additional investments in working capital to finance increased activity
levels.
In addition to fixed assets and working capital acquired in Brenner, capital
expenditure of R147,2 million was incurred during 2006/7, the bulk of which
was
in the automotive division for the rollout of the new Toyota Corolla, Toyota
Hilux and the Mercedes Benz C Class. Capital expenditure of R201,2 million
(including R144,8 million of expansionary capex, R97,7 million of which
relates to the Hosaf expansion) has been approved, which will be funded out of
operating cash flows and borrowings.
Industrial segment
FELTEX AUTOMOTIVE
Continued growth in sales was driven by increased market share, the improved
performance of Feltex Autoleathers and the inclusion of Caravelle Carpets in
the results for the first time. Although vehicle build did not grow
significantly over the period due to two model change-overs, long-term growth
prospects remain intact.
INDUSTRIAL FOOTWEAR
The strategic decision to import footwear has proven to be a success, and
further increases in revenue and operating margins have resulted. Demand for
gumboots remain strong, driven by increased volumes in mining, security and
construction and the strength of the brands.
HOSAF
Profitability has continued to improve due to the increased capacity of the
continuous polymerisation plant. The announced doubling of Hosaf`s PET
capacity in 2008/9 will ensure that Hosaf becomes a major player in the South
African market.
Consumer segment
JORDAN & CO
Own manufacturing volumes were static for the period and margin pressure by
the retail chains continues, but import volumes have increased significantly,
particularly in the main brands of Bronx, Asics and Olympic.
BULL BRAND FOODS
The high cost of weaners and high maize prices have resulted in greater margin
pressure being experienced in the fresh meat division. The cannery performed
well during the period, driven by strong consumer demand for convenience
products. Decisive management action has been taken to address the cost
challenges.
BRENNER MILLS
Margins have increased in the 2006/7 financial year as a result of a strong
marketing drive, a brand awareness campaign and synergies resulting from
integration into the KAP group.
GLODINA
Margins were maintained despite pressure from retailers, and Glodina has
invested further in capital expenditure to maintain its competitive edge. The
potential from the hospitality sector remains largely untapped, and consumer
demand remains strong.
CORPORATE ACTIVITY
Effective 1 May 2007, the group acquired 60% of the issued share capital of
Brenner Mills (Pty) Ltd, which holds significant synergistic potential with
Bull Brand Foods in terms of marketing, distribution and animal feed. The
group holds a call option over the remaining 40%, details of which are
provided in the notes to the annual report.
Effective 1 July 2006, the group acquired 100% of the issued share capital of
Caravelle Automotive Holdings (Pty) Ltd, which manufactures loose laid carpets
for the South African automotive market. Synergies with Feltex Automotive Trim
are substantial.
A 50/50 joint venture was formed with the Australian Futuris Automotive Group.
Futuris Feltex (Pty) Ltd will produce tufted carpeting and supply Feltex
Automotive Trim for the Mercedes Benz C Class and the export market.
Corporate governance
The directors subscribe to the principles incorporated in the Code of
Corporate Practices and Conduct as set out in the King II Report on Corporate
Governance (King Report) and comply therewith.
Sustainability
The group recognises the impact of its operations on society and the
environment, and is constantly striving to improve the well-being of all
stakeholders in this regard.
Directors and officers
There were no changes to the directors and officers during the period.
Capital distribution
The board has declared a final distribution out of share premium of 3 cents
per share, bringing the total distribution for the 18-month period to 17 cents
(2005: 12 cents). The distribution cover is approximately 3 times (2005: 3,8
times). The policy of the group is to declare distributions annually after the
year-end results have been finalised.
Outlook
The expansion of the Hosaf plant is expected to generate long-term returns for
shareholders, and growth in volumes and parts penetration at Feltex Automotive
is expected to continue on the basis of industry forecasts.
The consumer divisions remain well placed to maintain or improve operating
margins into the future, driven by the strength of our brands and an improved
performance from Bull Brand Foods. Brenner is expected to perform well and to
add considerably to the operating profit of the consumer division.
For and on behalf of the board
C E Daun P C T Schouten
Chairman Chief executive officer
CAPITAL DISTRIBUTION
In terms of the general authority obtained by the company at the general
meeting of shareholders held on Wednesday, 11 April 2007, the directors of the
company have declared a final capital distribution out of share premium of 3
cents per share in respect of the period ending 30 June 2007.
The distribution will be payable on Monday, 1 October 2007 to shareholders
recorded in the register at the close of business on Friday, 28 September
2007.
To comply with the requirements of Strate the following provisional dates are
applicable:
2007
Last date to trade cum-distribution Thursday, 20 September
Trading commences ex-distribution Friday, 21 September
Record date Friday, 28 September
Posting of cheques/electronic bank transfers Monday, 1 October
Accounts credited at CSDP or broker in respect
of shareholders who have dematerialised their shares Monday, 1 October
Share certificates may not be dematerialised or rematerialised between Friday,
21 September 2007 and Friday, 28 September 2007, both days inclusive.
Any changes to the above dates will be advised by notification on SENS and in
the press.
For and on behalf of the board
M Balladon
Company secretary
7 September 2007
CORPORATE INFORMATION
Non-executive directors: C E Daun* (Chairman), M J Jooste, J B Magwaza,
I N Mkhari, F Moller*, S H Nomvete, D M van der Merwe * German
Executive directors: P C T Schouten (CEO), J P Haveman (CFO)
Registration number: 1978/000181/06 Share code: KAP ISIN: ZAE000059564
Registered address: 1st Floor, New Link Centre, 1 New Street, Paarl, 7646
Postal address: PO Box 3639, Paarl, 7620.
Telephone: 021 872 8726. Facsimile: 021 872 8904
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited
Address: 70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Telephone: 011 370 5000. Facsimile: 011 327 3003
Sponsor: PSG Capital (Pty) Ltd
Please see these results on
www.kapinternational.com
Date: 07/09/2007 16:41:01 Produced by the JSE SENS Department.
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