| Mon 10 May 2010, 14:49 | | APK - Astrapak Limited - Reviewed results for the financial year ended 28 |
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APK APKP
APK
APK - Astrapak Limited - Reviewed results for the financial year ended 28
February 2010 and cash dividend declaration
ASTRAPAK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1995/009169/06)
Share code: APK
ISIN: ZAE000096962
Share code: APKP
ISIN: ZAE000087201
("Astrapak" or "the Group")
REVIEWED RESULTS FOR THE FINANCIAL YEAR ENDED 28 FEBRUARY 2010 AND CASH DIVIDEND
DECLARATION
Group reorganisation completed
Profit from operations up 13%
HEPS from continuing operations up 88%
Gearing at 30%
Ordinary dividends of 26,4 cents
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
financial financial
year year
ended ended
% 28 February 28 February
(R`000) Notes change 2010 2009
CONTINUING OPERATIONS
Revenue 9 (5) 2 613 000 2 749 771
Cost of sales (1 959 502) (2 143 375)
Gross profit 8 653 498 606 396
Other operating income - 9 316
Distribution and selling (188 388) (185 880)
costs
Administrative and other (188 100) (179 138)
expenses
Share of results of - 183
associates
Profit from operations 10 277 010 250 877
before exceptional items
Exceptional items 10 (9 250) (13 607)
Profit from operations 11 13 267 760 237 270
Investment income 21 262 31 040
Finance costs (63 215) (116 842)
Profit before taxation 49 225 807 151 468
Taxation (75 884) (82 914)
Profit for the period from 119 149 923 68 554
continuing operations
DISCONTINUED OPERATIONS
Loss for the period from 12 (491) (21 394) (3 622)
discontinued operations
Profit for the period 98 128 529 64 932
Other comprehensive income 805 635
DISCONTINUED OPERATIONS
Effect of foreign currency 805 635
translations
Total comprehensive income 97 129 334 65 567
for the period
Attributable to:
Ordinary shareholders of the 153 107 695 42 631
parent
- Profit for the period: 129 399 45 779
from continuing operations
- Loss for the period from (22 509) (3 783)
discontinued operations
- Other comprehensive income 805 635
for the period
Preference shareholders of 13 483 18 125
the parent
Non-controlling interest 8 156 4 811
- Profit for the period from 7 041 4 650
continuing operations
- Profit for the period from 1 115 161
discontinued operations
Total comprehensive income 97 129 334 65 567
for the period
Earnings per ordinary share 13 154 90,1 35,5
(cents)
- continuing operations 183 109,1 38,6
- discontinued operations (513) (19,0) (3,1)
Fully diluted earnings per 13 155 87,9 34,5
ordinary share (cents)
- continuing operations 184 106,4 37,5
- discontinued operations (517) (18,5) (3,0)
Preference dividend paid and 13 483 18 125
accrued
Preference dividend per 898,87 1 208,33
preference share (cents)
RECONCILIATION OF HEADLINE EARNINGS
Reviewed Audited
financial financial
year year
ended ended
% 28 February 28 February
(R`000) Notes change 2010 2009
Profit for the period 155 106 890 41 996
attributable to ordinary
shareholders
- continuing operations 129 399 45 779
- discontinued operations (22 509) (3 783)
Headline earnings
adjustments
- IAS 39: Loss on exercise 1 837 960
of options
- IAS 27: Loss on disposal - 13 607
of subsidiary
- IFRS 5: Measurement to 6 383 15 380
fair value of assets held
for sale
- IAS 38: Impairment of - 13 143
goodwill in respect of
assets classified as held
for sale
- IAS 36: Impairment of 9 250 -
property, plant and
equipment
- IFRS 5: Profit on disposal (452) -
of assets out of Flexible
operations
- IAS 16 :: Loss/(profit) on 690 (355)
disposal of property, plant
and equipment
- Total tax effect of 7 076 40
adjustments
- Total non-controlling (2 457) 294
interest share of
adjustments
Headline earnings 52 129 217 85 065
attributable to ordinary
shareholders
- continuing operations 89 138 685 73 468
- discontinued operations (182) (9 468) 11 597
Headline earnings per 13 51 108,9 72,1
ordinary share (cents)
- continuing operations 88 116,9 62,3
- discontinued operations (182) (8,0) 9,8
Fully diluted headline 13 52 106,3 69,9
earnings per ordinary share
(cents)
- continuing operations 89 114,1 60,4
- discontinued operations (182) (7,8) 9,5
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
financial financial
year ended year ended
% 28 February 28 February
(R`000) Notes change 2010 2009
Assets
Non-current assets 14 1 177 094 1 033 186
Property, plant and 3 974 331 845 307
equipment
Deferred taxation 12 465 31 240
Goodwill and trademarks 149 712 149 358
Loans and investments 4 40 586 7 281
Current assets (20) 838 882 1 045 857
Inventories 5 252 971 229 956
Trade and other receivables 434 108 388 262
Cash and cash equivalents 6 140 422 110 110
Assets classified as held 7 11 381 317 529
for sale
Total assets (3) 2 015 976 2 079 043
Equity and liabilities
Total equity 14 991 335 869 482
Equity attributable to 815 797 697 520
ordinary shareholders of the
parent
Preference share capital and 142 590 142 590
share premium
Non-controlling interest 32 948 29 372
Non-current liabilities (13) 434 073 499 812
Long-term interest-bearing 278 972 341 052
debt
Long-term financial 20 044 18 887
liabilities
Deferred taxation 135 057 139 873
Current liabilities (17) 590 568 709 749
Trade and other payables 423 612 399 068
Shareholders for preference 9 668 7 504
dividends
Short-term interest-bearing 149 212 150 096
debt
Liabilities relating to 7 8 076 153 081
assets held for sale
Total equity and liabilities (3) 2 015 976 2 079 043
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
financial financial
year ended year ended
% 28 February 28 February
(R`000) Notes change 2010 2009
Cash generated from (12) 412 267 467 673
operations
(Increase)/Decrease in (37 932) 81 399
working capital
Non-cash transactions (14 689) (41 775)
Net financing costs and (121 497) (140 994)
taxation paid
Net cash inflow before 238 149 366 303
distributions to shareholders
Dividend distribution to (15 705) (35 289)
shareholders
Net cash inflow from (33) 222 444 331 014
operating activities
Capital expenditure (227 502) (188 717)
Net movements of investments, 2 149 (29 147)
subsidiaries and non-
controlling interests
Proceeds on the disposal of 144 645 -
assets held for sale
Proceeds on the disposal of 8 040 9 151
property, plant and equipment
Net cash outflow from (72 668) (208 713)
investing activities
Net cash (outflow)/ inflow (119 416) 29 554
from financing activities
Net increase in cash and 30 359 151 855
cash equivalents
Net cash and cash equivalents 110 063 (41 792)
at the beginning of the year
Net cash and cash equivalents 6 28 140 422 110 063
at the end of the year
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
financial financial
year ended year ended
28 February 28 February
(R`000) Notes 2010 2009
Opening balance 869 482 817 774
Comprising of:
Ordinary share capital and premium 199 502 199 502
Retained income 671 814 646 940
Non-distributable reserves 1 449 814
Capital reserve 8 339 (9 343)
Non-controlling put options (18 887) (44 438)
Treasury shares (156 697) (154 168)
Equity attributable to ordinary 697 520 639 307
shareholders of the parent
Preference share capital and premium 142 590 142 590
Non-controlling interest 29 372 35 877
Movements:
Total comprehensive income 129 334 65 567
Ordinary dividends paid (4 386) (19 261)
Preference dividends paid (13 483) (18 125)
Contributions made by minorities 392 2 649
Acquisition of non-controlling (586) (11 826)
interest
Exercise of put options by non- 1 091 25 551
controlling shareholders
Adjustment to fair value of put (2 248) -
options
Reversal of foreign currency (2 254) -
translation reserve on disposal of
investment
Reduction in treasury shares due to 5 703 2 749
exercise of options
Incentive scheme movements (1 203) (5 278)
Share-based expense for the year 9 493 9 682
Closing balance 991 335 869 482
Comprising:
Ordinary share capital and premium 199 502 199 502
Retained income 778 704 671 814
Non-distributable reserves - 1 449
Capital reserve 8 9 832 339
Non-controlling put options (20 044) (18 887)
Treasury shares (152 197) (156 697)
Equity attributable to ordinary 815 797 697 520
shareholders of the parent
Preference share capital and premium 142 590 142 590
Non-controlling interest 32 948 29 372
Total equity 991 335 869 482
SUPPLEMENTARY INFORMATION
Reviewed Audited
financial financial
year ended year ended
% 28 February 28 February
change 2010 2009
Number of ordinary shares in issue 135 131 135 131
(`000)
Weighted average number of ordinary 118 618 118 037
shares in issue (`000)
Fully diluted weighted average 121 590 121 669
number of ordinary shares in issue
(`000)
Number of preference shares in issue 1 500 1 500
(`000)
Net asset value per share (cents) 13 808 712
Net tangible asset value per share 17 682 585
(cents)
Closing share price 49 1 001 671
Closing price to net asset value per 33 1,2 0,9
ordinary share
Closing price to net tangible asset 36 1,5 1,1
value per ordinary share
Market capitalisation (R million) 49 1 352,7 906,7
Net interest-bearing debt as a 30 53
percentage of equity (%)
Net debt (35) 287 762 441 925
Long-term interest-bearing debt 278 972 341 052
Short-term interest-bearing debt 149 212 210 983
Cash resources (140 422) (110 110)
Interest cover 6,4 2,8
Net working capital days 36,8 29,4
Contingent liabilities 24 133 22 107
Number of employees (10) 3 935 4 390
- continuing operations 3 871 3 877
- discontinued operations 64 513
Earnings before interest, taxation, 5 396 802 378 627
depreciation and amortisation and
exceptional items ("EBITDA") -
continuing operations
Earnings before interest, taxation, 389 026 415 657
depreciation and amortisation and
exceptional items ("EBITDA") -
total Group
Earnings before interest, taxation, (7 776) 37 030
depreciation and amortisation and
exceptional items ("EBITDA") -
discontinued operations
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Disclosed Disclosed
as as
Films in Flexibles
in
(R `000) Rigids Flexibles prior year prior year
Revenue for 2010 1 444 038 1 359 563
segment
2009 1 368 634 1 543 828 1 347 740 104 243
Transactions with 2010 (99 872) (90 729)
other operating
segments of the
Group
2009 (86 288) (76 403) (63 770) (2 639)
Revenue for 2010 1 344 166 1 268 834
external
customers
2009 1 282 346 1 467 425 1 283 970 101 604
Profit from 2010 206 109 70 901
operations
(segment result)
2009 153 832 97 045 86 396 6 407
Total assets 2010 1 142 591 862 004
2009 1 018 265 791 715 627 448 101 417
Total liabilities 2010 578 163 438 402
2009 440 632 676 735 556 221 91 483
Capex 2010 113 953 110 116
2009 135 851 47 217 33 959 1 289
Depreciation 2010 84 458 35 328
2009 92 128 36 005 27 940 5 307
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
Disclosed as Total
Industrials continuing Discontinued Total
in
(R `000) prior year operations operations Group
Revenue for 2 803 601 252 351 3 055 952
segment
91 845 2 912 462 572 430 3 484 892
Transactions (190 601) (27 227) (217 828)
with other
operating
segments of the
Group
(9 994) (162 691) (59 112) (221 803)
Revenue for 2 613 000 225 124 2 838 124
external
customers
81 851 2 749 771 513 318 3 263 089
Profit from 277 010 (8 266) 268 744
operations
(segment result)
4 242 250 877 33 283 284 160
Total assets 2 004 595 11 381 2 015 976
62 850 1 809 980 269 063 2 079 043
Total 1 016 565 8 076 1 024 641
liabilities
29 031 1 117 367 92 194 1 209 561
Capex 224 069 3 433 227 502
11 969 183 068 5 649 188 717
Depreciation 119 786 490 120 276
2 758 128 133 8 426 136 559
Refer to note1 for details of adoption of IFRS 8 and impact of presentation of
segmental results for the Group.
ABBREVIATED NOTES FOR THE YEAR ENDED 28 FEBRUARY 2010
1. Basis of preparation and accounting policies
These condensed consolidated results for the year ended 28 February 2010 are
prepared in accordance with recognition and measurement requirements of
International Financial Reporting Standards ("IFRS"), the disclosure
requirements of IAS 34, the South African Companies Act (Act 61 of 1973, as
amended) and in compliance with the Listings Requirements of the JSE Limited.
The principal accounting policies and methods of computation adopted are
consistent with those applied for the year ended 28 February 2009 and the Group
has further adopted Revised IAS 1 -"Presentation of Financial Statements" ("IAS
1") and IFRS 8 - "Operating Segments" ("IFRS 8").
IAS 1 - This standard requires non-owner changes in equity to be presented
separately from owner changes in equity in a separate performance statement.
In terms of the standard, entities can choose whether to present one performance
statement (the statement of comprehensive income) or two statements (the income
statement and a statement of comprehensive income). The Group has elected to
present one performance statement.
IFRS 8 - This new standard requires the adoption of a management approach under
which segment information is presented on the same basis as that used for
internal reporting and decision-making purposes. The Group has identified the
Executive Committee as its main decision-maker in respect of the allocation of
resources and assessment of performance. Internationally, plastic packaging is
categorised into two categories, namely Rigids and Flexibles.
The Group has restructured both its operations and management structures over
the last 12 to 18 months and has now adopted these internationally recognised
categories for internal reporting and decision-making purposes. As a result, the
segmental information contained in these condensed consolidated results have now
been changed to align with these categories and to reflect the information
presented and used by the Executive Committee for its decision-making and
assessment purposes.
Deloitte & Touche, the Group`s independent auditor, has reviewed the condensed
consolidated results contained in this preliminary report and their unmodified
report is available for inspection at the Company`s registered office.
2. Comparative figures
Comparative figures have been reclassified, in accordance with the requirements
of IAS 1 and IFRS 8, as a result of the adoption of these standards.
3. Property, plant and equipment
Reviewed Audited
financial financial
year year
ended ended
28 February 28 February
2010 2009
Opening net carrying amount 845 307 926 092
Additions 227 502 188 717
Classified as assets held for sale (741) (117 311)
Reclassified from assets held for sale 48 466 -
Disposal of subsidiaries (1 565) (6 836)
Disposals (8 730) (8 796)
Impairment (15 632) -
Depreciation (120 276) (136 559)
- Continuing operations (119 786) (128 133)
- Discontinued operations (490) (8 426)
Closing net carrying amount 974 331 845 307
Capital expenditure for the period 227 502 188 717
Capital commitments
- contracted not spent 21 881 9 680
- authorised not contracted 11 483 56 618
The Group`s property portfolio has a carrying value of R137 million and a
current market value of R255 million. These properties are of strategic value to
the Group due to their locations. Certain owned properties, previously
classified as assets held for sale in terms of IFRS 5, have now been
reclassified after a decision was made not to dispose of these properties and to
retain them because of their strategic value. In addition, the property, plant
and equipment in respect of International Tube Technology (Pty) Ltd has now been
classified as assets held for sale. See note 7 in this regard.
4. Loans and investments
Investment in Really Useful Investments 2 934 6 788
(Pty) Ltd
Investment in Izakhamzi Plastics (Pty) Ltd - 470
Vendor loan to Afripack Consumer Flexibles 37 640 -
(Pty) Ltd in terms of Flexibles disposal
transaction
Listed investments - 11
Unlisted investments 12 12
Loans and investments at end of the year 40 586 7 281
5. Inventories
Inventories amounting to R1 934 110 (2009: R1 042 484) are carried at net
realisable value.
6. Cash and cash equivalents
Cash and cash equivalents in continuing 140 422 110 110
operations
Bank overdrafts - (47)
Net cash and cash equivalents at the end of 140 422 110 063
the year
7. Assets held for sale and liabilities relating to assets held for sale
The transaction in terms of which the Group disposed of certain of its Flexible
operations, associated properties and its equity interest in the Mauritian Joint
Venture were all completed during the financial year.
As indicated in note 3 above, a decision was made not to dispose of certain
owned properties previously classified as held for sale and these have therefore
now been reclassified.
The assets and liabilities relating to International Tube Technology (Pty) Ltd
and International Edgeboard Technology (Pty) Ltd has been presented as held for
sale following the directors` decision to dispose of the group`s equity
interests in these companies. As the effect was immaterial the comparative
numbers in the condensed consolidated statement of comprehensive income and
condensed consolidated segmental analysis has not been restated.
The closing balances of both assets held for sale and liabilities relating to
assets held for sale are represented by the assets and liabilities of the two
entities.
Assets held for sale/sold consist of the
following:
Opening balance as at 1 March 317 529 -
Assets of Flexible disposal group (251 535) 269 063
Movements in values of assets held for sale (17 528) -
Properties classified (from)/to held for (48 466) 48 466
sale (refer to note 3 for reclassification)
International Tube Technology (Pty) Ltd 11 381 -
Assets held for sale at the end of the year 11 381 317 529
Liabilities relating to assets held for
sale/sold consist of the following:
Opening balance as at 1 March 153 081 -
Repayment of liabilities (60 888) 44 161
Properties classified to held for sale - 16 726
(refer to note 3 for reclassification)
Movements in values of liabilities relating (18 533) -
to assets held for sale
Liabilities relating to assets of Flexible (73 660) 92 194
disposal group disposed
International Tube Technology (Pty) Ltd 8 076 -
Liabilities relating to assets held for 8 076 153 081
sale at the end of the year
8. Capital reserve
The capital reserve relates to employee share options valued using the Black-
Scholes method and the cash financed stock plan. Included in administrative and
other expenses is IFRS 2 - "Share Based Payments" charges of R9,5 million (2009:
R9,7 million).
9. Revenue
Revenue for the Group 2 803 601 2 912 462
Transactions with other entities within the (190 601) (162 691)
Group
Revenue for external customers 2 613 000 2 749 771
Volume (in `000 tons) 94 738 95 097
10. Exceptional items
Impairment of property, plant and equipment (9 250) -
Loss on disposal of subsidiary - (13 607)
Exceptional items (9 250) (13 607)
11. Profit from operations
Profit from operations are arrived at after taking the following into account:
Net loss/(profit) on disposal of property, 690 (355)
plant and equipment
Impairment of property, plant and equipment 9 250 -
Depreciation 119 786 128 133
Net loss on exercise of share options 1 837 960
IFRS 2 - Share Based Payment expenses 9 493 9 682
12. Loss for the period from discontinued operations
The transaction in terms of which the Group disposed of certain of its Flexible
operations, associated properties and its equity interest in the Mauritian Joint
Venture were all completed during the financial year.
During the year the Group also disposed of its equity interest in Izakhamzi
Plastics (Pty) Ltd.
The assets and liabilities relating to International Tube Technologies (Pty)
Ltd, a producer of paper cores and tubes have been presented as held for sale
following the directors` decision to dispose of the group`s equity interest in
this company.
The results of discontinued operations is therefore represented by the trading
results of these entities for the period being reported upon, the loss realised
upon the disposal of the Flexible disposal group and any losses recognised on
the remeasurement of assets held for sale.
Revenue 225 124 513 318
Expenses (234 073) (485 384)
(Loss)/profit for the period from (8 949) 27 934
discontinued operations
Profit on disposal of discontinued 452 -
operations
(Loss)/profit before taxation from (8 497) 27 934
discontinuing operations
Taxation (6 514) (3 033)
(Loss)/profit after taxation of (15 011) 24 901
discontinued operations
Loss recognised on the measurement of (6 383) (28 523)
assets of the disposal group
Loss for the period from discontinued (21 394) (3 622)
operations
The net cash flows incurred by discontinued
operations for the period are represented
below:
Operating cash (outflows)/inflows (70 211) 2 509
Investing cash inflows/(outflows) 103 367 (2 397)
Financing cash (outflows)/inflows (49 378) 20 151
Net (decrease)/increase in cash and cash (16 222) 20 263
equivalents from discontinued operations
13. Earnings per ordinary share and headline earnings per ordinary share -
basic and fully diluted
Earnings per ordinary share is calculated by dividing the profit attributable to
ordinary shareholders of the parent by the weighted average number of shares in
issue over the period that the attributable profit was generated.
Headline earnings per ordinary share is calculated by dividing the headline
earnings attributable to ordinary shareholders of the parent by the weighted
average number of shares in issue over the period that the headline earnings was
generated.
Fully diluted earnings and headline earnings per ordinary share is determined by
adjusting the weighted average number of shares in issue over the period to
assume conversion of all dilutive ordinary shares, being shares issued in terms
of the share incentive trust and the cash financed stock plan.
14. Events after the reporting period
No fact or circumstance material to the appreciation of this report has occurred
between 28 February 2010 and the date of this report.
COMMENTARY
GROUP PROFILE AND STRATEGIC REVIEW
During the past 18 months Astrapak engaged in a strategic review of its
portfolio of operations, target markets, management structures, capital
structures and its underlying growth strategies. The information extracted
during this review was analysed and used to redefine the future strategy for the
Group. This strategy, which has proven to be both resilient and sustainable, was
fundamental in the performance delivered and now reported upon. Our strategy
will therefore continue to centre around focusing on our core businesses optimal
capital allocation, organic growth, cost and efficiencies and transformation.
One of the key decisions flowing from this process was a resolution to focus and
invest in the Group`s core strengths resulting in the following:
- Effective 8 August 2009 Astrapak disposed of certain of its flexible
businesses to Afripack Consumer Flexibles (Pty) Ltd ("Afripack") for a sale
consideration of R153,7 million (refer to SENS announcements dated 31 March 2009
and 12 August 2009 ("the SENS announcements")).
- Astrapak disposed of its equity interest in its Mauritian JV and the property
occupied by one of the flexible operations to Afripack for a purchase
consideration of R30,0 million. All of these transactions were completed and the
purchase consideration settled before the end of the financial year (refer to
the SENS announcement dated 14 April 2010).
- Effective 12 August 2009, Astrapak acquired certain assets from Nampak Flexpak
for utilisation within the Flexibles division (refer to the SENS announcements).
- Astrapak disposed of its 20% interest in Izakhamzi Plastics (Pty) Ltd.
- Astrapak has also decided to dispose of its 60% interest in International Tube
Technology (Pty) Ltd and its 100% interest in International Edgeboard Technology
(Pty) Ltd. The disposal is still subject to the fulfilment of certain conditions
precedent which are anticipated to be fulfilled shortly. The related assets and
liabilities and results for the year are therefore disclosed as a discontinued
operation in terms of the requirements of IFRS 5 - as the effect was immaterial,
the comparative numbers in the condensed consolidated statement of comprehensive
income and condensed consolidated segmental analysis have not been restated.
As at 28 February 2010 the Group successfully implemented an internal
reorganisation programme in terms of the corporate rules contained in sections
41 to 47 of the Income Tax Act ("the Act"). These corporate rules allow for the
transfer of assets with no immediate tax consequences between Group companies as
defined in the Act. This restructuring programme was an internal process aimed
at reducing the costs associated with a cumbersome Group structure, it involved
no third parties and had no impact on the employment or any employees within the
Group.
The main benefits to be derived from the internal restructure are:
(a) a simplified Group structure - a reduction from the existing 75 to only 19
statutory entities;
(b) significant annual cost and time-based savings associated with
administration and compliance (audit, tax, legislative and other); and
(c) improved resource utilisation and allocation.
The changes will better align the structure and strategic intent of the Group
and is designed to reduce costs, enhance efficiency, decision-making and speed
of execution.
With the adoption of IFRS 8 - Operating Segments the Group aligned its internal
reporting and decision-making processes with that of its local and international
peers and now consists of only two reportable segments, being Rigids and
Flexibles.
The profile of the Group has therefore changed significantly from that reported
in the previous period. The Group is now best described as a manufacturer and
distributor of an extensive range of Rigid and Flexible plastic packaging
products, producing annualised continuing revenues in excess of R2,6 billion.
Manufacturing facilities are located in all the main centres of South Africa and
the Group employs 3 935 people.
The operations are now grouped into two segments - Rigids and Flexibles -
servicing mainly food, beverage, personal care, pharmaceutical, agricultural,
industrial and retail markets.
The Group continues to be focused on innovation-led growth in plastic packaging,
and plans to continue expansion through a balance of organic, project and
acquisitive growth.
FINANCIAL RESULTS
Executive summary
We are pleased to report a set of solid results despite a challenging consumer
environment and volatile economy. Many of our businesses have gained market
share in a period where we have seen the size of the overall market showing a
significant retreat. Overall volumes for the year were less than half a percent
down on that of the previous financial year. We are comfortable that our
underlying businesses have adapted well to the changed economic environment and
remain competitive to continue to deliver on the Group`s target in so far as
growth and profitability is concerned.
In general, we are pleased with the performance of our Rigids operations. Both
revenue and profitability within the Flexible operations, however, continue to
be under tremendous pressure as a result of excess capacity within the industry
and continued pressure on consumer spending in the commodity type markets within
which the Flexible operations serve. Numerous strategies and initiatives are
currently being deployed in the Flexible division and we expect to see an
improvement in both areas in the near future.
Market conditions
In general, markets continued to be extremely turbulent and unpredictable
throughout the year. Increased inflation and extensive job losses put tremendous
pressure on consumers` disposable income and this impacted negatively on the
results.
The Group is pleased to report that volumes for the financial year were down by
less than half a percent, compared to a decline of 3.7% in volumes reported at
the interim stage. Where volume losses were incurred within the Group, it was as
a result of a declining end market. Notwithstanding these very challenging
trading conditions and the slight decline in overall volumes, the Group believes
that it has managed to grow its overall market share significantly, which has
contributed to the delivery of a set of credible results ahead of market
expectations.
This performance was mainly due to the resilience of the Group`s diversity of
products, its strong and ever improving position in key growth markets, the
successful implementation of a number of programs and initiatives aimed at
extracting synergies, reducing the Group`s cost structure, improving internal
efficiencies and a much improved cash management and treasury function.
Continuing operations
Turnover, at R2,6 billion (2009: R2,7 billion), decreased by 5,0% against the
comparative period. The decrease in turnover was as a result of selling price
decreases passed onto customers due to the reductions seen in polymer input
prices, as volumes only declined marginally.
Towards the end of the last financial year the Group introduced a number of
programmes and initiatives aimed at reducing its cost structure, enhancing
efficiencies and extracting synergies - all of these have now started to make
contributions to the financial results of the Group. Gross profit increased by
7,7% to R653,5 million (2009: R606,4 million) due to a reduction in direct
manufacturing costs attributable to the recent programmes and initiatives
adopted by the Group. Other costs, consisting of selling, administration and
distribution overheads, totalled R376,5 million (2009: R355,7 million)
representing only a 5,8% increase over that of the comparative period.
The cost reductions and efficiency improvements have all impacted positively on
operating profit (before exceptional items) which increased to R277,0 million
(2009: R250,9 million), representing an increase of 10,4% and an operating
margin of 10,6% (2009: 9,1%). The Group, however, believes that there is scope
for further enhancement and will continue to drive the various programmes and
initiatives to continue to improve operating profit margins.
Exceptional items consist of asset impairments of R9,3 million. These
impairments relate to assets or asset groups where technology upgrades are being
undertaken and the Group was required to impair the existing assets or asset
groups to their realisable values. The affected businesses and the Group will,
however, benefit significantly from these technology upgrades into the future.
The Group has benefited from the downward cycle in interest rates and lower
average interest rates over the period. The prime rate of interest averaged
11,2% compared to 15,1% in the comparative period. Proceeds from disposals,
improved working capital and cash management and the resultant reduction in the
average levels of net debt led to net interest paid reducing by 51,1% to R42,0
million (2009: R85,8 million).
The investment in net working capital has increased to R263,5 million (2009:
R219,2 million), mainly as a result of an increase in debtors days. In most
instances this related to an extension in credit terms granted in exchange for
security of existing and additional future volumes. This level of working
capital investment represents a 37-day net working capital cycle (2009: 29
days). The net working capital cycle target for the Group remains 35 days and
the Group anticipates a return to such levels during the next financial year.
Taxation amounted to R75,9 million (2009: R82,9 million) and includes the
payment of Secondary Taxation on Companies ("STC") of R1,9 million. The
effective tax rate is 33,6% (2009: 54,7%) and this is mainly as a result of a
number of permanent differences and deferred tax assets not being raised against
certain tax losses. The comparative tax rate of 54,7% was unusually high as a
result of a number of deferred tax assets being impaired by the Group. The
sustainable future tax rate is expected to approximate the company income tax
rate of 28% plus STC on any ordinary and preference dividends paid.
HEPS from continuing operations increased by 88% to 116,9 cents (2009: 62,3
cents). Fully diluted HEPS increased by 89% to 114,1 cents (2009: 60,4 cents).
As previously mentioned, the results in the comparative period were negatively
impacted by certain once-off items of expenditure and a reversal of a number of
deferred tax assets totalling approximately R20 million. This resulted in a much
lower base being established for comparative purposes and the improvement in
HEPS as reported in this announcement should be normalised for these items to
determine the true growth from operational activities. Normalising for these
items, HEPS growth of 50% was achieved over the normalised comparative period.
Other than the transactions set out in the "Group profile" above, no new
acquisitions or major investments were completed by the Group during the period
under review. Capital expenditure incurred was R227,5 million (2009: R188,7
million) and included the acquisition of the Nampak Flexpak assets. The Group
acquired all the remaining minority interests in Consupaq (Pty) Ltd.
Improved cash generation and cash management within the operations, together
with the receipt of the proceeds from the disposal of certain Flexible
businesses, meant that the Group was able to reduce its net debt position to
R287,8 million (2009: R441,9 million) resulting in the ratio of net interest-
bearing debt to equity decreasing from 53% in the prior year to 30%. The Group
will continue to focus on improved cash generation and working capital
management to ensure that these levels of gearing remain sustainable.
Discontinued operations
The loss on discontinued operations for the period was R21,4 million (2009: R3,6
million loss).
These losses are mainly attributable to the operational performance of the
discontinued operations. Details of the loss on discontinued operations are set
out in the notes to the condensed financial statements.
CHANGES TO THE BOARD OF DIRECTORS
Over the last year the Board has been reorganised and now comprises a majority
of independent non-executive directors and is compliant with the King Report III
on Corporate Governance requirements for independent non-executives and
committee structures.
The following changes to the Board occurred during the period:
Resignations
Mr J Buchanan on 18 March 2009; Ms K Shongwe stepped down as Acting Chair on 18
March 2009 but continues to serve as a non-executive director. Ms E Cornelius
resigned as company secretary on 28 February 2010.
Appointments
Mr G Steffens as an independent non-executive director on 18 March 2009 and Ms P
Langeni as an independent non-executive chairman on 18 March 2009. Mr J Hannig
as an alternate non-executive director to Mr P Botha on 7 December 2009. Mr G
Lapan as company secretary on 1 March 2010.
Prospects
The slowdown in economic activity has also had a positive impact as it has
allowed the Group to reassess its strategy, assess many of its businesses and
structures in view of the new economic reality, and take decisive action.
Following the delivery against its resultant strategy, the Group is now well
positioned to further grow its volumes, improve its product offerings and
achieve further cost and efficiency improvements in pursuit of its strategy to
achieve an above-average return on equity.
Delivery and further consolidation will be the focus in the next financial year
and the Group will aim to:
- successfully commission a number of new strategic projects;
- grow volumes over its entire product offering;
- improve working capital management and solvency ratios; and
- further extract costs and improve efficiencies.
With markets still not indicating a sustainable recovery and remaining extremely
volatile, the rate of growth in revenue and earnings will continue to be
severely impacted upon by the strength and timing of the economic recovery.
ORDINARY DIVIDEND TO ORDINARY SHAREHOLDERS OF THE PARENT
Astrapak has declared a final ordinary dividend of 26,4 cents per share (2009:
Nil) in respect of the financial year ended 28 February 2010.
This distribution is calculated with reference to the group dividend policy that
results in an effective three times dividend cover.
The total distribution to ordinary shareholders of the parent is therefore 26,4
cents (2009: Nil) and represents a total distribution value of R35,7 million.
The anticipated STC obligation in respect of such dividend will be R3,57
million.
Set out below are the salient dates applicable to the dividend declaration:
Last date to trade "cum" dividend Friday, 25 June 2010
Trading commences "ex" dividend Monday, 28 June 2010
Record date Friday, 2 July 2010
Payment date Monday, 5 July 2010
Share certificates may not be dematerialised or rematerialised between Monday,
28 June 2010 and Friday, 2 July 2010, both days inclusive.
ACKNOWLEDGEMENTS
The Board would like to express its appreciation to all its management, staff
and stakeholders for their commitment, efforts and support during what has been
a very challenging and testing time in the history of the Group.
For and on behalf of the Board
Marco Baglione Manley Diedloff
(Chief Executive Officer) (Chief Financial Officer)
Denver 10 May 2010
Board of Directors: P Langeni* (Chair), M Baglione (Chief Executive Officer), M
Diedloff (Chief Financial Officer), P C Botha*, D C Noko*,
K P Shongwe*, G Z Steffens* *Non-executive
Company Secretary: G Lapan
Registered Office: 5 Kruger Street, Denver, 2011 - PO Box 75769, Gardenview,
2047, South Africa - Tel +27 11 615 8011 - Fax +27 11 615 9790
Registrar: Computershare Investor Services (Pty) Ltd - Ground Floor, 70 Marshall
Street, Johannesburg, 2001 - PO Box 61051, Marshalltown, 2107
OPERATING ENTITIES
Flexibles Division: Alex White - Barrier Film Converters - City Packaging - East
Rand Plastics - Knilam Packaging - Packaging Consultants - Pack-Line Holdings -
Peninsula Packaging - Plusnet/Geotex - Saflite - Tristar Plastics - Ultrapak
Rigids Division: Cinqpet - Consupaq - Hilfort - JJ Precision Plastics - Marcom
Plastics - PAK 2000 - Plastech - Plastform - Plas-top - Plastop (KwaZulu-Natal)
- Thermopac
Date: 10/05/2010 14:49:01 Produced by the JSE SENS Department.
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