| Fri 26 Sep 2008, 16:01 | | NPK - Nampak Limited - Trading Statement |
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NPK
NPK
NPK - Nampak Limited - Trading Statement
Nampak Limited
("Nampak" or "the Company")
(Incorporated in the Republic of South Africa)
(Registration number 1968/008070/06)
Share code: NPK
ISIN: ZAE000071676
Trading statement, information to Nampak shareholders regarding the Bidvest
Group Limited ("Bidvest") pro rata offer to all Nampak shareholders to acquire
up to 30% of the ordinary shares held by each Nampak shareholder ("the Offer")
and withdrawal of cautionary announcement
TRADING STATEMENT
In terms of paragraph 3.4(b) of the Listings Requirements of the JSE Limited,
a company is required to publish a trading statement as soon as it becomes
aware that its financial results for the period to be reported on next will
differ by 20% or more from those of the corresponding period of the previous
year.
Nampak advises that for the financial year ending 30 September 2008 its
headline earnings per share ("HEPS") is expected to be between 0% and 10%
lower than the 184.6 cents per share for the financial year ended 30 September
2007. Basic earnings per share ("EPS") is expected to be between 60% and 80%
lower than the 181.0 cents per share for the financial year ended 30 September
2007. These differences are mainly attributable to:
- a strategic review coupled with a revision of future cash flows relating
to the Cartons Europe business resulting in a decision to close the division`s
Short Run site at Crewkerne in the UK and to fully impair goodwill relating to
the Cartons business on the continent; and
- a fire at the group`s Healthcare UK Thorpe site that destroyed the entire
factory resulting in certain consequential costs including an impairment of
all goodwill relating to the Healthcare UK business.
This is partially offset by:
- the release of a tax provision of R 102.7 million following the
settlement with SARS which was announced on 11 December 2007; and
- the accrual of an estimate of the amount to be received from insurance
relating to the fire in the United Kingdom. However, this amount is subject to
change as the amount to be recovered has not yet been finalised with the
insurers.
The impairment charges relating to goodwill and assets of approximately R680
million are not of a trading nature and do not affect cash flows.
Nampak expects its trading income before abnormal items for the period to be
between 15% and 20% lower than for the corresponding period in the previous
year. This is primarily due to difficult trading conditions in South Africa
and Europe, the impact of not consolidating the results of the Zimbabwean
operations in the current year and a write off following the discovery of
certain irregularities in Nampak Nigeria Plc.
The results in respect of the reporting period have not been reviewed or
reported on by the Company`s auditors. This update is based on the available
information at the time of publication. Nampak`s financial year end results
are expected to be finalised and published on SENS on or about 21 November
2008.
THE OFFER BY BIDVEST
Shareholders are referred to the Nampak announcement issued on 10 September
2008 and to the offer document which Bidvest has indicated will be dispatched
to shareholders on 29 September 2008 setting out the terms of the Offer.
The Offer has been made by Bidvest directly to Nampak shareholders and, if
accepted, will be a transaction between Bidvest and Nampak shareholders.
Accordingly the board of directors of Nampak ("the Board") is not required to
review, comment on or give its opinions on the Offer. Nevertheless the Board
considers it appropriate to draw the attention of shareholders to certain
aspects of the Offer which the Board has noted and to use this opportunity to
communicate certain salient aspects of Nampak`s strategic plan to
shareholders.
It is for shareholders to decide whether or not to accept the offer and to
take such advice from their professional advisors as the shareholders may
consider necessary. However, the Board recommends that shareholders take
cognisance of the information contained in this announcement in assessing the
merits of the Offer.
Nampak has over the past 6 months undertaken a strategic review and revised
the strategic plan for its business which will be tabled for approval by the
Board in October 2008. The Board considers it appropriate to communicate
certain salient aspects of the strategic plan so that shareholders are able to
take this information into account when considering the Offer.
Accordingly, this announcement includes:
- certain comments on the terms of the Offer;
- salient aspects of Nampak`s strategic plan; and
- a withdrawal of the cautionary announcement.
CERTAIN COMMENTS ON THE OFFER
Values Nampak at a discount
The Offer values Nampak at a discount to its closing share prices on 3
September 2008 (the day prior to Bidvest`s announcement of its intention to
make the Offer) as well as the 30, 60 and 90 day volume weighted average
prices ("VWAPs") up to and including 3 September 2008. The Offer therefore
implies that shareholders should forego immediate value of up to 8.9% in
exchange for the introduction of Bidvest as a shareholder.
Period Bidvest Bidvest Nampak Implied Offer Offer %
Cum Ex (R) Nampak Discount Discount
Dividend Dividend Value (R) (R)
(1) (R)
Spot 3 112.00 109.29 15.99 14.57 (1.42) (8.9%)
Sept 08
30-day 104.87 102.16 14.70 13.62 (1.07) (7.3%)
VWAP
60-day 101.33 98.62 13.60 13.15 (0.45) (3.3%)
VWAP
90-day 104.19 101.48 13.91 13.53 (0.38) (2.8%)
VWAP
Average 105.60 102.89 14.55 13.72 (0.83) (5.6%)
(1) Reduced by R2.71, the present value of the R2.75 Bidvest dividend as at 3
September 2008 assuming an interest rate of 15.5%
Delivers negative control
If successful, the Offer will give Bidvest a blocking stake (negative control)
in Nampak for which no control premium is being offered.
Further decreases the free float of Nampak
Nampak currently has significant concentration in its shareholder base and,
should the Offer be successful, the top five shareholders of Nampak would own
more than 65% of the shares in issue. This further decrease in liquidity
could have a negative impact on share price performance, market valuation and
the investment appeal of Nampak.
Is likely to be dilutive for Nampak shareholders (excluding total returns)
Earnings, HEPS and NAV
The following table provides an illustration of the impact of the Offer on the
EPS, HEPS and NAV attributable to a shareholder that accepts the Offer for 30%
of its shares. The respective numbers therefore comprise 70% of the relevant
Nampak numbers and 30% of the relevant Bidvest numbers, bearing in mind that
Nampak shareholders will receive one Bidvest share for every 7.5 Nampak shares
tendered into the Offer. The pro forma financial effects below have been
prepared for illustrative purposes only.
Before After Change
Offer Offer
Per Nampak share
currently held
Basic Earnings (1) 212 193 (9.1%)
Headline Earnings (1) 207 189 (8.7%)
Tangible NAV (2) 968 813 (16.0%)
(1) The "Before Offer" column represents Nampak earnings for the rolling 12
months ended 31 March 2008. The "After Offer" column represents 70% of the
Nampak earnings for the rolling 12 months ended 31 March 2008 plus 30% of the
pro forma Bidvest earnings to 30 June 2008 assuming the Nampak shareholding
had been equity accounted. The Bidvest earnings after the Offer have been
calculated assuming Bidvest acquires 163m shares in Nampak
(2) The "Before Offer" column represents the tangible NAV per Nampak share as
at 31 March 2008. The "After Offer" column represents 70% of the Nampak
tangible NAV as at 31 March 2008 plus 30% of the Bidvest tangible NAV 30 June
2008 assuming the Nampak shareholding had been equity accounted. The Bidvest
tangible NAV after the Offer has been calculated assuming Bidvest acquires
163m shares in Nampak
Dividends
Over the past 3 years1 Nampak shareholders have earned R22.20 in dividends for
every 7.5 shares they own while Bidvest shareholders have earned R13.10 in
dividends for every share they own. A Nampak shareholder would thus, on a
retrospective basis, have received more than 70% greater aggregate dividends
on the 7.5 Nampak shares than what would have been received on the single
Bidvest share offered in exchange.
Valuation
Nampak is currently trading, on its lowest PE ratio over the last ten years.
Management believes that the current rating does not reflect the long term
potential of the business and the value-unlock initiatives which are
highlighted below.
Total returns
Notwithstanding the above, the Board notes that over the past 3 years, on a
total return basis2, Nampak and Bidvest shareholders` have earned a total
return of 22% and 43% respectively.
SALIENT ASPECTS OF NAMPAK`S STRATEGIC PLAN
Over the past five years, Nampak`s business has undergone substantial
restructuring and rationalisation, including the closure of approximately 40
factories, which has been successful in improving efficiencies and reducing
costs. This also included the disposal of non-core assets, while investments
in new territories such as Nigeria and Angola have been made.
While 2008 has been a very challenging year, management believes that Nampak`s
strategic plan will unlock value for shareholders over the next three years.
Two key components of the strategic plan are a restructure of the Nampak
Group`s ("Group") portfolio and the generation of value through the Group`s
recent substantial growth investment programme, details of which appear below.
Portfolio Restructure
The strategic review has identified those operations that fit with the longer
term vision of Nampak and which generate appropriate and sustainable returns
on invested capital. Further investment will be made in these businesses
where there are high barriers to entry or where Nampak has a sustainable
competitive advantage.
The strategic review has also identified certain businesses which are non-core
and underperforming. Nampak intends to exit these businesses as they
generally display low entry barriers and are unlikely to generate appropriate
returns. The businesses in this category constitute a sizeable part of
Nampak`s turnover, but do not materially contribute to trading income. It is
anticipated that this process will be completed within approximately two
years. The disposal of these businesses is expected to generate cash,
increase return on net assets and significantly improve the quality of
earnings.
In addition to the above, there are a number of sizeable businesses which have
recently underperformed relative to their full potential. These businesses
are in the process of being turned around.
Growth Projects
Future earnings are set to benefit from R1.9 billion committed capital
investment on the following projects over the next three years:
- The R1 billion new beverage can manufacturing plant in Angola scheduled
for completion in the second half of 2009, with a planned capacity of
700 million cans per annum. Angola is growing at over 20% p.a. and is one of
the fastest growing economies in Africa;
- The new R550 million corrugated paper mill in Rosslyn, which is in the
process of being commissioned, is expected to reduce the cost of waste-based
raw materials thereby significantly enhancing its competitive position; and
The R300 million (Nampak`s share R150 million) upgrade of the glass furnace
was completed in July 2008.
In addition there are a number of future projects intended to meet growing
market demand and to reduce the cost of production that have been identified,
but not yet approved.
SUMMARY
The strategic plan will result in:
- the exit from businesses that are non-core or where the appropriate
returns are not being generated;
- the turnaround of underperforming businesses;
- the driving of growth in the areas where Nampak has a competitive
advantage and market dynamics provide it with sufficient opportunity to
generate improved shareholder returns.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcements dated 4 September
2008 and 10 September 2008 and are advised that following the firm Offer from
Bidvest and this announcement by the Board, the cautionary announcement is
hereby withdrawn.
Sandton
26 September 2008
Merchant Bank Sponsor Attorneys
Rand Merchant Bank UBS Bowman Gilfillan
_______________________________
1 31 March 2005 to 31 March 2008 for Nampak shareholders and 30 June 2005 to
30 June 2008 for Bidvest shareholders
2 Nominal total dividends paid (with no adjustment for the time value of
money) and share price returns for a 3 year holding period ending 3 September
2008
Date: 26/09/2008 16:01:27 Produced by the JSE SENS Department.
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