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APK APKP
APK
APK/APKP - Astrapak - Unaudited Interim Results for the six months ended 31
August 2010
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")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2010
Commentary
Group Profile
The Group is 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 3 988 people.
The operations are 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
The results reported are disappointing. Although numerous significant issues
impacted negatively on the results, the Group should have performed better than
reported given the level of volume growth achieved in the first six months and
the benefits of initiatives introduced in previous periods. Management is in the
process of implementing corrective measures to deal with the issues that have
contributed to the poor performance of the Group for the first six months of
trading and management are confident that these issues will be satisfactorily
addressed in an aggressive manner.
The following issues have impacted significantly on the Group during the
reporting period:
- Industrial action within operations, which included the largest operation
within the Group, reduced reported EBITDA by an estimated R35 million;
- Consumer markets served by the Group have continued to retract, which in turn
has resulted in increased competition, aggressive pricing from competitors, and
pricing pressure from customers;
- As a result it has been difficult to pass on to customers price increases
timeously and numerous essential increases had to be delayed to the second half
of the financial year. This led to a significant under recovery of costs
related to raw material price increases and energy increases which were
significant during the period reported on; and
- In general, the cost base has increased significantly during the reporting
period and management has been tasked to actively re-align the entire cost base
of the Group.
Notwithstanding these challenging trading conditions the Group believes that it
has managed to grow its overall market share significantly. The above factors
however negatively impacted on operating margins for the period. Whilst the
factors effecting consumers, competitors and customers are not expected to
change in the short term, the Group will continue to focus on retaining and
growing existing volumes, reducing and monitoring its cost base, work towards
the correct long-term objectives as contained in its strategic plan and address
the short-term issues identified during a critical review of its performance
during the first six months.
Fundamentally the Group has significant growth potential, but finds itself
operating in a very aggressive market place within a challenging consumer and
competitive environment.
Financial performance
Turnover, at R1,35 billion (2009: R1,26 billion) increased by 7% against the
comparative period. The increase in turnover was as a result of a 5% increase in
volumes and 2% selling price increases passed onto customers due to the
increases seen in input prices.
Gross profit decreased by 15,9% to R265,5 million (2009: R315,8 million) mainly
due to the issues referred to in the executive summary above. Other costs,
consisting of selling, administration and distribution overheads totalled R199,6
million (2009: R195,3 million) representing an increase of only 2,2% over that
of the comparative period.
The Group has continued to benefit from the downward cycle in interest rates and
lower average interest rates over the period. The prime rate of interest
averaged 10,1% compared to 12,8% in the comparative period. Working capital and
cash management and much reduced average levels of net debt led to net interest
paid reducing by 45,7% to R15,1 million (2009: R 27,8 million).
The investment in net working capital has increased by 4,0% to R279,6 million
from R268,9 million at the end of February 2010. This level of working capital
investment represents a 37,9 day net working capital cycle compared to a 37,6
day cycle at the end of February 2010. The net working capital cycle target for
the Group remains 37 days and the Group anticipates a return to such levels
during the next financial year.
Taxation amounted to R17,6 million (2009: R29,2 million) and includes the
payment of Secondary Taxation on Companies ("STC") of R2,4 million. The
effective tax rate is 31,6% (2009: 31,3%) and this approximates the company
income tax rate of 28% plus the STC of R2,4 million on the ordinary and
preference dividends paid.
HEPS from continuing operations decreased by 50% to 23,6 cents
(2009: 47,1 cents). Fully diluted HEPS decreased by 50% to 23,1 cents (2009:
46,3 cents).
No new acquisitions were completed but the Group did acquire the remaining
minority interests in the Plastech group of companies during the period under
review. Capital expenditure incurred was R129,7 million (2009: R95,3 million)
and included the investments into some significant projects of which the
benefits will only be seen over the next 6 to 12 calendar months.
Net debt increased to R383,5 million (2009: R300,4 million) resulting in the
ratio of net interest-bearing debt to equity increasing from 34% in the prior
year to 40%. The Group will continue to focus on improved cash generation and
working capital management to ensure that these levels of gearing remain more
than sustainable.
Changes to the Board of Directors
Mr Thabiso Mashugane has been appointed as an alternate director to Ms Khumo
Shongwe on the 15th September 2010.
Prospects
The slowdown in economic activity continues to negatively impact on the Group in
many ways. Markets are still not indicating a sustainable recovery and remain
volatile.
Throughout these volatile and unpredictable times our strategy will continue to
centre around focussing on our core businesses, optimal capital allocation,
organic growth, reduction in our cost base, efficiencies and transformation.
Acknowledgements
The Board would like to express its appreciation to all its stakeholders for
their commitment, efforts and support during what has been a challenging and
testing time for the Group.
For and on behalf of the Board
Marco Baglione Manley Diedloff
(Chief Executive Officer) (Chief Financial Officer)
Denver
12 October 2010
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
% 31 August 31 August 28 February
(R`000) Notes change 2010 2009 2010
CONTINUING
OPERATIONS
Revenue 9 7 1 349 220 1 255 368 2 613 000
Cost of sales (1 083 769) (939 555) (1 959 502)
Gross profit (16) 265 451 315 813 653 498
Other operating 4 891 490 -
income
Distribution (102 021) (92 855) (188 388)
and selling
costs
Administrative (97 555) (102 459) (188 100)
and other
expenses
Share of - 69 -
results of
associates
Profit from (42) 70 766 121 058 277 010
operations
before
exceptional
items
Exceptional 10 - - (9 250)
items
Profit from 11 (42) 70 766 121 058 267 760
operations
Investment 4 551 12 716 21 262
income
Finance costs (19 610) (40 480) (63 215)
Profit before (40) 55 707 93 294 225 807
taxation
Taxation (17 583) (29 174) (75 884)
Profit for the (41) 38 124 64 120 149 923
period from
continuing
operations
DISCONTINUED
OPERATIONS
Profit/(loss) 12 (101) 211 (14 246) (21 394)
for the period
from
discontinued
operations
Profit for the (23) 38 335 49 874 128 529
period
Other - (2 254) 805
comprehensive
income
DISCONTINUED
OPERATIONS
Effect of - (2 254) 805
foreign
currency
translations
Total 38 335 47 620 129 334
comprehensive
income for the
period
Attributable
to:
Ordinary (19) 28 854 35 617 107 695
shareholders of
the parent
- Profit for 28 643 52 117 129 399
the period from
continuing
operations
- Profit/ 211 (14 246) (22 509)
(loss) for the
period from
discontinued
operations
- Other - (2 254) 805
comprehensive
income for the
period
Preference 6 096 7 614 13 483
shareholders of
the parent
Non-control- 3 385 4 389 8 156
ling interest
- Profit for 3 385 4 389 7 041
the period from
continuing
operations
- Profit for - - 1 115
the period from
discontinued
operations
Total (19) 38 335 47 620 129 334
comprehensive
income for the
period
Earnings per 13 (25) 24,1 32,1 90,1
ordinary share
(cents)
- Continuing (46) 23,9 44,2 109,1
operations
- Discontinued (102) 0,2 (12,1) (19,0)
operations
Fully diluted 13 (25) 23,6 31,5 87,9
earnings per
ordinary share
(cents)
- Continuing (46) 23,3 43,4 106,4
operations
- Discontinued (102) 0,2 (11,9) (18,5)
operations
Preference 6 096 7 614 13 483
dividend paid
and accrued
Preference 406,40 507,60 898,87
dividend per
preference
share (cents)
Reconciliation of headline earnings
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
% 31 August 31 August 28 February
(R`000) Notes change 2010 2009 2010
Profit for the (24) 28 854 37 871 106 890
period con-
tributable to
ordinary
shareholders
- Continuing 28 643 52 117 129 399
operations
- Discontinued 211 (14 246) (22 509)
operations
Headline
earnings
adjustments
- IAS 39: Loss - 1 771 1 837
on exercise of
options
- IFRS 5: - - 6 383
Measurement to
fair value of
assets held for
sale
- IAS 36: - 4 350 9 250
Impairment of
property, plant
and equipment
- IFRS 5: - - (452)
Profit on
disposal of
assets out of
Flexible
operations
- IAS 16: (411) 1 703 690
(Profit)/loss
on disposal of
property, plant
and equipment
- Total tax 47 5 212 7 076
effect of
adjustments
- Total non- 14 (5) (2 457)
controlling
interest share
of adjustments
Headline (44) 28 504 50 902 129 217
earnings
attributable to
ordinary
shareholders
- Continuing (49) 28 293 55 584 138 685
operations
- Discontinued (105) 211 (4 682) (9 468)
operations
Headline 13 (45) 23,8 43,1 108,9
earnings per
ordinary share
(cents)
- Continuing (50) 23,6 47,1 116,9
operations
- Discontinued (105) 0,2 (4,0) (8,0)
operations
Fully diluted 13 (45) 23,3 42,4 106,3
headline
earnings per
ordinary share
(cents)
- Continuing (50) 23,1 46,3 114,1
operations
- Discontinued (105) 0,2 (3,9) (7,8)
operations
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
% 31 August 31 August 28 February
(R`000) Notes change 2010 2009 2010
Assets
Non-current 11 1 244 887 1 126 466 1 177 094
assets
Property, plant 3 1 033 159 920 499 974 331
and equipment
Deferred 18 907 13 698 12 465
taxation
Goodwill and 149 700 149 863 149 712
trademarks
Loans and 4 43 121 42 406 40 586
investments
Current assets (5) 805 638 852 314 838 882
Inventories 5 262 027 248 483 252 971
Trade and other 479 882 406 368 434 108
receivables
Cash and cash 6 63 729 155 447 140 422
equivalents
Assets 7 - 42 016 11 381
classified as
held for sale
Total assets 4 2 050 525 1 978 780 2 015 976
Equity and
liabilities
Total equity 8 996 075 918 726 991 335
Equity 826 420 742 795 815 797
attributable to
ordinary
shareholders of
the parent
Preference 142 590 142 590 142 590
share capital
and share
premium
Non-controlling 27 065 33 341 32 948
interest
Non-current
liabilities 4 454 822 439 203 434 073
Long-term 307 331 303 023 278 972
interest-
bearing debt
Long-term 5 598 18 608 20 044
financial
liabilities
Deferred 141 893 117 572 135 057
taxation
Current (3) 599 628 620 851 590 568
liabilities
Trade and other 454 618 454 769 423 612
payables
Shareholders 5 096 6 233 9 668
for preference
dividends
Short-term 139 914 152 808 149 212
interest-
bearing debt
Liabilities 7 - 7 041 8 076
relating to
assets held for
sale
Total equity 4 2 050 525 1 978 780 2 015 976
and liabilities
Condensed consolidated statement of changes in equity
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
31 August 31 August 28 February
(R`000) Notes 2010 2009 2010
Opening balance 991 335 869 482 869 482
Comprising of:
Ordinary share capital 199 502 199 502 199 502
and premium
Retained income 778 704 671 814 671 814
Non-distributable - 1 449 1 449
reserves
Capital reserve 8 9 832 339 339
Non-controlling put (20 044) (18 887) (18 887)
options
Treasury shares (152 197) (156 697) (156 697)
Equity attributable to 815 797 697 520 697 520
ordinary shareholders
of the parent
Preference share 142 590 142 590 142 590
capital and premium
Non-controlling 32 948 29 372 29 372
interest
Movements:
Total comprehensive 38 335 47 620 129 334
income
Ordinary dividends (35 676) - (4 386)
paid
Preference dividends
paid (6 096) (7 614) (13 483)
Contributions made by 189 - 392
non-controlling
interest
Retained income (5 672) - -
acquired on purchase
of non-controlling
interest
Sale of retained 4 759 - -
income to non-
controlling interest
Acquisition of non- (9 457) (420) (586)
controlling interest
Exercise of put 10 000 279 1 091
options by non-
controlling interest
shareholders
Adjustment of fair 4 446 - (2 248)
value of put options
Reversal of foreign - - (2 254)
currency translation
reserve on disposal of
investment
Reduction in treasury - 5 378 5 703
shares due to exercise
of options
Incentive scheme - - (1 203)
movements
Share based expense 3 912 4 001 9 493
for the period
Closing balance 996 075 918 726 991 335
Comprising of:
Ordinary share capital 199 502 199 502 199 502
and premium
Retained income 770 969 709 685 778 704
Non-distributable - (805) -
reserves
Capital reserve 8 13 744 4 340 9 832
Minority put options (5 598) (18 608) (20 044)
Treasury shares (152 197) (151 319) (152 197)
Equity attributable to 826 420 742 795 815 797
ordinary shareholders
of the parent
Preference share 142 590 142 590 142 590
capital and premium
Minority interest 27 065 33 341 32 948
Total equity 996 075 918 726 991 335
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
% 31 August 31 August 28 February
(R`000) Notes change 2010 2009 2010
Cash generated (23) 141 816 184 290 412 267
from operations
Increase in (10 699) (3 443) (37 932)
working capital
Non-cash 411 (1 703) (14 689)
transactions
Net financing (45 316) (49 806) (121 497)
costs and
taxation paid
Net cash inflow (33) 86 212 129 338 238 149
from activities
before
distributions
to shareholders
Dividend (41 957) (8 884) (15 705)
distribution to
shareholders
Net cash inflow (63) 44 254 120 454 222 444
from operating
activities
Capital (129 724) (96 358) (227 502)
expenditure
Acquisition of (17 213) (1 520) 2 149
investments,
subsidiaries
and minority
interests
Proceeds on the 4 037 117 729 144 645
disposal of
assets held for
sale
Proceeds on the 2 892 728 8 040
disposal of
property, plant
and equipment
Net cash (140 008) 20 579 (72 668)
(outflow)/
inflow from
investing
activities
Net cash inflow 19 060 (90 579) (119 416)
/(outflow)from
financing
activities
Net (decrease)/ (76 693) 50 454 30 359
increase in
cash and cash
equivalents
Net cash and 140 422 110 063 110 063
cash
equivalents at
the beginning
of the period
Net cash and 6 (60) 63 729 160 517 140 422
cash
equivalents at
the end of the
period
Condensed consolidated segmental analysis
(R`000) Rigids Flexibles
Revenue for the segment 2010 754 013 702 370
2009 670 259 662 822
Transactions with other operating 2010 (54 269) (52 894)
segments of the Group
2009 (34 958) (42 755)
Revenue for external customers 2010 699 744 649 476
2009 635 301 620 067
Profit from operations (segment 2010 63 383 7 383
result)
2009 81 210 39 848
Total assets 2010 959 635 1 090 890
2009 997 944 938 820
Total liabilities 2010 349 176 705 274
2009 433 876 619 137
Capex 2010 92 454 37 270
2009 12 935 82 402
Depreciation 2010 46 402 22 013
2009 43 932 16 502
Condensed consolidated segmental analysis (continued)
Disclosed Disclosed Disclosed
as Films as Flexibles as
Industrials
in prior in prior in prior
(R`000) year year year
Revenue for the 2010
segment
2009 593 263 48 784 20 775
Transactions with 2010
other operating
segments of the
Group
2009 (39 937) (2 818) -
Revenue for external 2010
customers
2009 553 326 45 966 20 775
Profit from 2010
operations (segment
result)
2009 35 586 3 469 793
Total assets 2010
2009 805 097 86 664 47 059
Total liabilities 2010
2009 553 409 42 382 23 346
Capex 2010
2009 73 743 2 677 5 982
Depreciation 2010
2009 13 350 2 032 1 120
Condensed consolidated segmental analysis (continued)
Total
continuing Discontinued Total
(R`000) operations operations Group
Revenue for the
segment 2010 1 456 383 21 338 1 477 721
2009 1 333 081 233 851 1 566 932
Transactions with 2010 (107 163) (3 921) (111 084)
other operating
segments of the
Group
2009 (77 713) (16 270) (93 983)
Revenue for external 2010 1 349 220 17 417 1 366 637
customers
2009 1 255 368 217 581 1 472 949
Profit from 2010 70 766 211 70 977
operations (segment
result)
2009 121 058 (7 681) 113 377
Total assets 2010 2 050 525 - 2 050 525
2009 1 936 764 42 016 1 978 780
Total liabilities 2010 1 054 450 - 1 054 450
2009 1 053 013 7 041 1 060 054
Capex 2010 129 724 - 129 724
2009 95 337 - 95 337
Depreciation 2010 68 415 - 68 415
2009 60 434 492 60 926
Supplementary information
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
31 August 31 August 28 February
(R`000) 2010 2009 2010
Number of ordinary shares in 135 131 135 131 135 131
issue (`000)
Weighted average number of 119 809 118 018 118 618
ordinary shares in issue
(`000)
Fully diluted weighted 122 312 120 030 121 590
average number of ordinary
shares in issue (`000)
Number of preference shares 1 500 1 500 1 500
in issue (`000)
Net asset value per share 809 778 808
(cents)
Net tangible asset value per 684 651 682
share (cents)
Closing share price (cents) 810 990 1 001
Closing price to net asset 1 1,3 1,2
value per ordinary share
Closing price to net tangible 1,2 1,5 1,5
asset value per ordinary
share
Market capitalisation (R 1 094,6 1 337,8 1 352,7
million)
Net interest-bearing debt as 40 34 30
a percentage of equity (%)
Net debt 383 516 300 384 287 762
Long-term interest-bearing 307 331 303 023 278 972
debt
Short-term interest-bearing 139 914 152 808 149 212
debt
Cash resources (63 729) (155 447) (140 422)
Interest cover 4,7 4,4 6,4
Net working capital days 37,9 29,2 37,6
Contingent liabilities 4 646 9 659 24 133
Number of employees 4 052 3 932 3 935
- Continuing operations 3 988 3 863 3 871
- Discontinued operations 64 69 64
Earnings before interest, 138 664 173 121 396 802
taxation, depreciation and
amortisation ("EBITDA") -
continuing operations
Earnings before interest, 139 180 181 422 389 026
taxation, depreciation and
amortisation ("EBITDA") -
total Group
Earnings before interest, (516) (8 301) (7 776)
taxation, depreciation and
amortisation ("EBITDA") -
discontinued operations
Abbreviated notes for the six months ended 31 August 2010
1. Basis of preparation and accounting policies
These condensed consolidated results for the six months ended 31
August 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 2010 except for the adoption of amendments relating to
IFRS 3 Revised - Business Combinations and IAS 27 Amendments -
Consolidated and Separate Financial Statements which became
effective during the current period.
2. Comparative figures
Comparative figures, relating to Share Based Payments have been
reclassified from the Statement of Comprehensive Income to
Statement of Changes in Equity, in accordance with the
requirements of IAS 1.
Unaudited Unaudited Audited
six months six months financial
ended ended year ended
31 August 31 August 28 February
2010 2009 2010
3. Property, plant and
equipment
Opening net carrying 974 331 845 307 845 307
amount
Additions 129 724 95 337 227 502
Classified as assets held - (5 254) (741)
for sale
Re-classified from assets - 48 466 48 466
held for sale
Disposal of subsidiaries - - (1 565)
Disposals (2 481) (2 431) (8 730)
Impairment - - (15 632)
Depreciation (68 415) (60 926) (120 276)
- Continuing operations (68 415) (60 434) (119 786)
- Discontinued operations - (492) (490)
Closing net carrying 1 033 159 920 499 974 331
amount
Capital expenditure for 129 724 95 337 227 502
the period
Capital commitments
- contracted not spent 40 129 52 892 21 881
- authorised not 8 790 24 318 11 483
contracted
The Group`s property portfolio has a carrying value of R145
million and a current market value of R270 million. These
properties are of strategic value to the Group due to their
locations.
4. Loans and investments
Investment in Really 2 934 7 092 2 934
Useful Investments (Pty)
Ltd
Vendor loan to Afripack 40 175 35 302 37 640
Consumer Flexibles (Pty)
Ltd in terms of Flexibles
disposal transaction
Unlisted investments 12 12 12
Loans and investments at 43 121 42 406 40 586
end of the period
5. Inventories
Inventories amounting to R289 643 (Feb 2010: R1 934 110) are
carried at net realisable value.
6. Cash and cash equivalents
Cash and cash equivalents 126 146 160 517 140 422
in continuing operations
Bank overdrafts (62 417) - -
Net cash and cash 63 729 160 517 140 422
equivalents at the end of
the year
7. Assets held for sale and liabilities relating to assets held
for sale
The sale of International Tube Technology (Pty) Limited and
International Edgeboard Technology (Pty) Limited was concluded
on 23 July 2010.
The comparatives consist of the Flexibles disposal group.
Assets held for sale/sold consists of the following:
Opening balance as at 1 11 381 317 529 317 529
March
Assets of Flexible - (226 579) (251 535)
disposal group
Assets of ITT disposal (11 381) - -
group disposed (effective
date of transaction 23
July 2010)
Movements in values of - (18 066) (17 528)
assets held for sale
Properties classified - (48 466) (48 466)
from held for sale (refer
note 3 for
reclassification)
International Tube - 17 598 11 381
Technology (Pty) Limited
Assets held for sale at - 42 016 11 381
the end of the period
Liabilities relating to assets held for sale/sold consists of
the following:
Opening balance as at 1 8 076 153 081 153 081
March
Repayment of liabilities - (52 561) (60 888)
Liabilities relating to (8 076) - -
disposal group classified
to held for sale
Movements in values of - (26 860) (18 533)
liabilities relating to
assets held for sale
Liabilities relating to - (73 660) (73 660)
assets of Flexible
disposal group disposed
International Tube - 7 041 8 076
Technology (Pty) Limited
Liabilities relating to - 7 041 8 076
assets held for sale at
the end of the period
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 R3,9 million (2009: R4
million).
9. Revenue
Revenue for the Group 1 456 384 1 333 081 2 803 601
Transactions with other (107 163) (77 713) (190 601)
entities within the Group
Revenue for external 1 349 221 1 255 368 2 613 000
customers
Volume (in `000 tons) 47 105 44 874 94 738
10. Exceptional items
Impairment of property, - - (9 250)
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