| Tue 31 Mar 2009, 13:54 | | APK - Astrapak - Disposal & Acquisition Announcement And Trading Statement |
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APK
APK
APK - Astrapak - Disposal & Acquisition Announcement And Trading Statement
ASTRAPAK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1995/009169/06)
ISIN: ZAE000096962
Share Code: APK
("Astrapak" or "the Group")
DISPOSAL & ACQUISITION ANNOUNCEMENT AND TRADING STATEMENT
A. Disposals and acquisition
Introduction
The board of directors of Astrapak ("the Board") has undertaken a thorough
review of its portfolio of operations and target markets and has redefined the
future strategy for its businesses. As a result the Board has resolved to
consolidate the operations of the Astrapak group ("the Group") to focus and
invest in its core Films and Rigids divisions. As the first step in the
implementation of its new strategy, the Board wishes to advise shareholders that
it has agreed terms on the disposal of certain businesses within the Flexibles
Division, and has further agreed terms on an acquisition for the Films Division.
Disposal of certain Flexibles operations ("the Disposal")
Description of the Disposal
Astrapak has entered into a conditional agreement of sale ("the Sale Agreement")
in terms of which it has agreed to dispose, as going concerns, the following
businesses to Pamish Investment No 46 (Pty) Ltd, a wholly owned subsidiary of
Afripack (Pty) Ltd ("the Purchaser"):
- Astraflex (Pty) Ltd;
- Cape Wrappers (Pty) Ltd;
- Diverse Labelling Consultants (Pty) Ltd;
- Astra Repro (Pty) Ltd;
- Tamperpak (Pty) Ltd; and
- Astrapak Flexibles (a division of Astrapak Kwazulu-Natal (Pty) Ltd)
(collectively defined as "the Sale Businesses")
The Sale Businesses will be represented by stock, trade and other debtors, plant
and equipment, trademarks, contracts and goodwill and the assumption of certain
defined liabilities represented by trade and other creditors. Excluded from the
Disposal will be all interest-bearing third party debt, liabilities or assets
relating to taxation and any inter-group (other than trading) assets or
liabilities.
In addition to the Sale Businesses, the Purchaser will also acquire the two
properties occupied by Cape Wrappers (Pty) Ltd ("the Properties")at market
related values, as well as the Group`s equity interest in its Mauritian Joint
Venture (collectively referred to as "the Transaction").
This represents a category 2 transaction in terms of the JSE Limited ("JSE")
Listing Requirements and disclosure is made in accordance with the requirements
of section 9.15.
Description of activities of Sale Businesses and Mauritian Joint Venture
The businesses, which all currently form part of the Group`s Flexibles Division,
are manufacturers of, or service providers to manufacturers of, high quality,
multi-colour, flexible packaging products with varying run length, web width and
print features.
The businesses provide products and services to a wide array of markets,
including confectionery, beverage, food, pharmaceutical, medical and personal
care.
Rationale for the Transaction
During its business review process the Group determined that it wanted to focus
on the development and growth of its core Rigids and Films divisions, and
accordingly the decision was made to dispose of some of the non-core Flexibles
businesses.
Given the operations` state-of-the-art technology, market position and team, the
businesses attracted a number of interested buyers. The Group ensured that it
identified a suitable parent for the businesses and that the needs of its
employees were addressed as a priority. The Sale Businesses are therefore being
sold as a going concern and all employees are being transferred in terms of
section 197 of the Labour Relations Act.
Purchase consideration
The total amount payable by the Purchaser in terms of the Transaction in R
183.65 million and is made up of:
- a purchase consideration of R153.65 million for the Sale Businesses which
shall be settled on the effective date, anticipated towards the end of June
2009, once all the conditions precedent have been fulfilled or waived, as
the case may be ("the Effective Date");
- a purchase consideration of R 15.0 million for the Property which shall be
settled upon the transfer of the Property;
- a purchase consideration of R 15.0 million for the Group`s equity interest
in its Mauritian Joint Venture which shall be settled upon the transfer of
the equity interest.
Both the sale of the Property and the Group`s equity interest in its Mauritian
Joint Venture is conditional upon the successful transfer of the Sale
Businesses.
To assist with the funding of the Transaction, Astrapak, via a wholly owned
subsidiary, has agreed to provide part-funding to the Purchaser ("the Loan
Agreement") by means of a secured vendor loan ("the Loan"). The salient features
of the Loan are:
- the amount of the Loan is R35 million;
- the Loan shall bear interest at an interest rate equal to 2.5% per annum
above the prime rate;
- interest will accrue for the first three years from the Effective Date and
thereafter be paid quarterly;
- the Loan shall be repaid seven years after the Effective Date; and
- the Loan is repayable in full or in part at any earlier date at the
Purchaser`s discretion, with no penalty for early repayment/s.
In terms of the Sale Agreement the Sale Businesses have given certain
undertakings with regard to the value of the net working capital to be delivered
to the Purchaser as at the Effective Date. Should a different value of net
working capital be delivered to the Purchaser the balance will be settled in
cash within 125 days of the Effective Date.
The Application of the proceeds
The initial proceeds from the Transaction, represented by the total purchase
consideration less the Loan and taxation payable in respect of the Transaction,
will be utilised to settle all third party liabilities not assumed by the
Purchaser, which will ultimately result in a reduction of the facility
utilisation and debt of the Group by the sum of approximately R142 million,
thereby reducing its gearing and future debt service costs to its bankers.
Proceeds from the Loan will be allocated and utilised as and when received.
Conditions Precedent
A financial, legal and environmental due diligence has been completed to the
satisfaction of the Purchaser, and the Transaction remains subject only to
conditions precedent normal in a Transaction of this nature including approval
of the Competition authorities.
Other significant terms of the Transaction
As part of the Transaction the parties have entered into reciprocal supply and
restraint of trade agreements which will be in place for a period of three years
from the Effective Date.
Financial Effects of the Transaction
The pro-forma financial information is the responsibility of the directors of
the Astrapak and has been prepared for illustrative purposes only to show how
the Transaction may have affected the results for the last published reporting
period, being the interim period ended 31 August 2008. Due to its nature, the
pro-forma effects may not fairly present Astrapak`s financial position, changes
in equity and results of its operations or cash flows. It does not purport to be
indicative of what the financial results would have been, had the Transaction
been implemented on a different date.
As is required, for the purposes of calculating Earnings Per Share ("EPS")
(basic and diluted) and Headline Earnings Per Share ("HEPS") (basic and diluted)
the pro-forma effects are calculated as if the Transaction was effected on 1
March 2008 and for the purposes of calculating net asset value and tangible net
asset value as if effected on 31 August 2008.
As the pro-forma numbers are based on the results for a six month period only,
the percentage changes in respect of earnings, EPS, headline earnings and HEPS
appear to be more material than if based on the results for a full 12 month
period and because of the relatively low earnings and headline earnings produced
during this 6 month period. Earnings are negatively impacted by items that are
classified as non-trading and non-recurring in nature and are therefore reversed
for the purposes of determining headline earnings and HEPS. These items, which
total R39.8 million, have no cash flow implications and include the impairment
of goodwill and of certain assets incorporated in the Transaction.
The Board accordingly believes that the actual impact of the Transaction on both
sustainable future earnings and headline earnings will be favourable for the
Group.
The pro-forma effects are as follows:
Before the After % Change
Transaction, implementation
as published of the
Transaction
Actual Pro-forma Pro-forma
(cents) (cents)
Earnings attributable to 10 287 (11 621) -213%
ordinary shareholders
Headline earnings 10 593 28 560 170%
attributable to ordinary
shareholders
Net asset value 680 844 661 030 -3%
Net tangible asset value 515 305 508 630 -1%
Net interest-bearing 70% 54%
debt as a percentage of
equity (%)
EPS 8.73 (9.86) -213%
HEPS 8.99 24.23 170%
Fully diluted EPS 8.43 (9.53) -213%
Fully diluted HEPS 8.68 23.41 170%
Net asset value per 578 561 -3%
share
Net tangible asset value 437 431 -1%
per share
Weighted average number 117 885 117 885
of shares in issue
(`000)
Fully diluted weighted 121 980 121 980
average number of shares
in issue (`000)
Actual number of shares 135 131 135 131
in issue (`000)
Notes:
1. The "Before the Transaction, as published" column has been extracted
without adjustment from the published unaudited interim results for the six
months ended 31 August 2008.
2. The differential between the percentage effect on HEPS and EPS relates to
items that are classified as non-trading and non-recurring in nature and
are therefore reversed for the purposes of determining headline earnings
and HEPS. These items, which total R 39.8million, have no cash flow
implications and include the impairment of goodwill and of certain assets
incorporated in the Transaction.
3. The pro-forma financial effects assume that the net proceeds from the
Transaction, being R 142m, are utilised to reduce the Group`s current debt
and therefore take into account the related interest saving.
4. Interest on the Loan is accrued for in terms of the Loan Agreement.
The pro-forma effects of the Transaction have not been reviewed or reported on
by the Group`s auditors.
Acquisition of certain plant, equipment and related stock from Nampak Flexpak
In line with its intention to grow its exposure in chosen markets, the Board
wishes to advise shareholders that it has reached agreement with Nampak in terms
of which the Group will acquire certain plant, equipment and related stock used
in its Flexpak business ("the Acquisition"). The benefits of the Acquisition to
the Group are:
- it fits the strategy to focus the operations of the Group on its Films and
Rigids Divisions and to grow these businesses both organically and by
acquisition;
- given the plant and equipment being acquired, as well as the condition
thereof, certain capacity constraints in the Group will be addressed which
will result in a reduced capital expenditure requirement in future
financial years; and
- the Group expects to retain a significant portion of the volumes related to
the plant and equipment being acquired, which would have a positive impact
on its financial results into the future.
A customer and technical due diligence has been completed to the satisfaction of
the Group and the Acquisition remains subject only to conditions precedent
normal in a transaction of this nature including approval of the Competition
authorities.
B. Trading statement - Financial year ended 28 February 2009
In terms of the Listings Requirements of the JSE, a company is required to
publish a trading statement as soon as it becomes aware that its financial
results for the next period to be reported will differ by 20% or more from those
of the corresponding period of the previous year.
The Group has had a strong recovery in the second half of the year and has
reduced the 84% HEPS deficit reported in its interim results to a HEPS deficit
of between 5% and 15% for the full financial year.
The main contributors to this recovery are:
- the strategy of extracting value by improving internal efficiencies and
adopting best practices across the Group is reaping rewards;
- the reduction in polymer prices, seen only towards the end of the reporting
period, created a much more stable trading environment;
- consumer demand remained consistent during the reporting period;
- the results in the second half of the comparative period were negatively
influenced by a number of non-recurring factors; and
- all stakeholders have bought into and committed to the adopted strategy.
The Board advises shareholders that the Group is now in the process of
finalising the results for the financial year ended
28 February 2009 and that HEPS is expected to be between 5% and 15% lower than
that reported in the comparative period and EPS is expected to be between 60%
and 70% lower. This will result in anticipated HEPS for the full year of between
58.7 cents and 65.6 cents (2008: 69.0 cents) and EPS between 22.9 cents and 30.5
cents (2008: 76.3 cents).
The expected results are impacted by the following:
- Certain deferred tax assets totalling R27.5 million, raised in subsidiary
companies during prior financial periods, are reversed. In terms of
International Accounting Standards, once the Group takes a decision to
reverse deferred tax assets, it is required to reverse those assets in full
against current period earnings, although the deferred tax assets might
have been created in prior periods or acquired upon acquisition of the
relevant subsidiary. The reversal of these deferred tax assets has no cash
flow impact and the related tax losses, against which these assets were
originally raised, are still available for utilisation within the relevant
subsidiaries in future years. This amount cannot be added back for the
purposes of determining headline earnings and therefore HEPS.
- An impairment charge of R25.9m in respect of goodwill and the sale assets
relating to the Sale Businesses referred to in this announcement is debited
to the Income Statement. This impairment charge does not affect cash flows,
is not of a trading nature and is added back for the purposes of
determining headline earnings and therefore HEPS.
- The Group has during the reporting period invoked a resolutive condition
contained in the original sale of shares agreement entered into with the
original vendors of Riverbend Trade and Invest 50 (Pty) Ltd ("Spuntech").
In effect the group has returned the shares to the original vendors and has
requested restitution in terms thereof, seeking the repayment of the
original purchase consideration and all other further advances. The matter
is currently being prepared for arbitration. The business has in the
interim period ceased trading. A prudent approach has been adopted in
accounting for this event and an impairment charge totalling R13.6m has
been made in the reporting period. This charge is not of a trading nature
and is added back for the purposes of determining headline earnings and
therefore HEPS.
The results in respect of the reporting period have not been reviewed or
reported on by the Group`s auditors and this trading statement is based on the
available information at the time of publication. The Group`s financial year end
results are expected to be finalised and published on SENS on or about 6 May
2009.
Sandton
31 March 2009
Merchant Bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 31/03/2009 13:54:00 Produced by the JSE SENS Department.
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