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Kap International Holdings Limited - Audited Results And Final Dividend
Declaration For The Year Ended 31 December 2004
KAP INTERNATIONAL HOLDINGS LIMITED
Registration number: 1978/000181/06
Share code: KAP
ISIN number: ZAE 000059564
* HEADLINE EARNINGS PER SHARE INCREASE BY 44%
* CASH FLOW GENERATED BY OPERATIONS OF R114 MILLION (2003: 18 MILLION)
* REVENUE OF R1,9 BILLION (2003: 0,6 BILLION)
* NET PROFIT FOR THE PERIOD OF R301 MILLION (2003: R8 MILLION)
* HEADLINE EARNINGS OF R105 MILLION (2003: R9 MILLION)
* FINAL DIVIDEND OF 5 CENTS PER SHARE (2003: NIL)
AUDITED RESULTS AND FINAL DIVIDEND DECLARATION FOR THE YEAR ENDED
31 DECEMBER 2004
Abridged group balance sheet
31 December 31 December
2004 2003
R`000 R`000
Assets
Non-current assets
Property, plant and equipment
and investment properties 399 483 50 333
Investments 25 366 21 320
Deferred taxation 134 806 -
559 655 71 653
Current assets 998 105 285 545
Inventories and agricultural assets 456 101 152 559
Receivables and prepayments 496 991 95 741
Cash and cash equivalents 45 013 37 245
Total assets 1 557 760 357 198
Equity and liabilities
Capital and reserves
Ordinary shareholders` equity 879 125 203 707
Minority interest 8 841 72
Non-current liabilities
Long term borrowings 78 558 185
Retirement benefit obligation 40 649 9 922
Deferred taxation 5 740 -
Current liabilities 544 847 143 312
Trade and other payables 350 162 70 025
Bank overdrafts 45 313 -
Short term borrowings 118 655 69 895
Provisions 30 717 3 392
Total equity and liabilities 1 557 760 357 198
Number of shares
- in issue (000) 418 720 168 120
- weighted average (000) 293 412 34 882
Net asset value per share (cents) 210,0 121,2
Net interest bearing debt to equity (%) 22,2 16,0
Abridged group cash flow statement
Year ended 8 months ended
31 December 31 December
2004 2003
R`000 R`000
Cash flows from operations
Cash generated from operations
before working capital changes 162 294 24 063
Net working capital changes (48 161) (5 820)
Cash generated from operations 114 133 18 243
Net finance costs (10 597) (13 636)
Taxation paid (13 560) (199)
Cash flows from operating activities 89 976 4 408
Cash flow from investing activities
Acquisition of subsidiaries,
net of cash acquired (444 244) -
Other investing activities (29 879) 11 043
Net cash (outflow)/inflow
from investing activities (474 123) 11 043
Cash flows from financing activities
Decrease in borrowings (27 243) (125 874)
Proceeds on share issue 373 845 138 693
Net cash inflow from
financing activities 346 602 12 819
Net (decrease)/increase
in cash and equivalents (37 545) 28 270
Opening cash and equivalents 37 245 8 975
Closing cash and equivalents (300) 37 245
Abridged group income statement
Year ended 8 months ended
31 December 31 December
2004 2003
R`000 R`000
Revenue 1 911 873 616 524
- continuing operations 1 911 873 539 276
- discontinued operations - 77 248
Operating profit 138 414 22 704
- continuing operations 138 414 30 532
- discontinued operations - (7 828)
Negative goodwill from acquisitions 190 039 -
Net finance costs (10 597) (12 635)
Share of results of joint ventures 1 247 (1 964)
Profit before tax 319 103 8 105
Taxation (15 676) (9)
Profit after taxation 303 427 8 096
Minority interest (1 958) (28)
Net profit for the period 301 469 8 068
Reconciliation of headline earnings
Net profit for the period 301 469 8 068
Adjusted for the after tax effect of:
Profit on sale of property
plant and equipment (3 104) (2 250)
Restructuring costs - 1 450
Sale of subsidiaries (3 111) 1 400
Negative goodwill (190 039) -
Headline earnings 105 215 8 668
Earnings per ordinary share (cents) 102,75 23,13
Headline earnings
per ordinary share (cents) 35,86 24,85
Dividend per share - declared (cents) 5,00 -
Abridged statement of changes in equity
Year ended 8 months ended
31 December 31 December
2004 2003
R`000 R`000
Balance at beginning of the period 203 707 56 167
Shares issued during the period 375 900 140 100
Share issue costs (2 049) (1 407)
Movement in foreign currency
translation reserve 98 779
Net profit for the period 301 469 8 068
Balance at the end of the period 879 125 203 707
Notes
1. Net financing costs
Interest paid 19 435 22 618
Interest received 8 838 9 983
10 597 12 635
2. Capital expenditure commitments
Contracted 24 485 -
Approved but not contracted 20 238 11 037
3. Operating lease commitments 67 232 35 535
4. Guarantees and contingent liabilities 4 398 -
5. Taxation
Taxation is lo w in relation to reported profits mainly due to the utilisation
of assessed losses and non-taxable income.
6. Basis of preparation of the results
The group`s accounting policies conform with South African Statements of
Generally Accepted Accounting Practice. The results for the year ended
31 December 2004 have been prepared on a basis consistent with that of the
previous year except for the following changes in accounting policies:
- Adopted IFRS3, business combinations which resulted in negative goodwill of
R190,039 million accounted for in income for the year ended 31 December 2004
- Joint ventures accounted for using the equity method.
The above changes had no effect on the results for the prior period.
7. Audited results
The results for the year ended 31 December 2004 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
Segmental analysis
Operating Total
Revenues profit assets
R`000 % R`000 % R`000 %
2004
Industrial 1 022 294 53 84 010 61 925 623 59
Consumer 894 740 47 52 104 38 540 407 35
Other (5 161) - 2 300 1 91 730 6
1 911 873 100 138 414 100 1 557 760 100
2003
Industrial 355 547 58 525 2 135 308 38
Consumer 260 977 42 11 713 52 193 250 54
Other - - 10 466 46 28 640 8
616 524 100 22 704 100 357 198 100
Group profile
Division Operating entity Product/service
Industrial Feltex Automotive Leather Automotive leather
manufacturer
Feltex Automotive Trim Integrated automotive trim
and acoustic manufacturer
Rieter Feltex Automotive (49%) Automotive acoustics and
thermal management
Feltex Fehrer (74%) Moulded polyurethane
manufacturer for seating and
other foam products for the
automotive industry
Feltex Foam Converting Manufacturer of slabstock
and peeled foams used for
lamination in the automotive
industry
Feltex Unifrax Supplier of mats for
catalytic converters for
exhausts of motor vehicles
Wayne Rubber Manufacturer of pre-cured
tread and industrial rubber
products
United Fram Manufacturer of industrial
leather footwear
Wayne Plastics Manufacturer of gumboots
and safety footwear
Mossop Western Leathers Tannery supplying bovine
leather to footwear and
leather goods industry
Hosaf Fibres Manufacturer of polyester
fibre and PET bottle resin
Consumer Jordan & Co Branded fashion footwear
and sport shoe manufacturer
and distributor
Bull Brand Foods Fresh and canned meal
manufacturer
Glodina Branded terry towel
manufacturer
Commentary
Review of results
The board of directors is pleased to report the successful integration of the
new businesses and a 44% increase in headline earnings per share to 35,86 cents
for the financial year to 31 December 2004. Existing businesses generated 69%
growth in revenue and a 95% increase in operating profit. Acquired businesses
added R1 billion to revenue and R79 million to operating profit for the six
month period from 1 July 2004.
Industrial divisionAutomotive
Car and light commercial vehicle sales in South Africa hit a record high of 450
000 units for 2004, a 22% increase over the previous year. Local vehicle build
increased by 7% to 434 000 units. Market growth has had a positive impact on
the results of the division. Annualised turnover increases and efficiency
improvements produced a substantially higher contribution to profits. All
divisions except Wayne Rubber increased their profit contributions. Total
investment in new plant and equipment amounted to R24 million representing a
major investment in the 2004 and 2005 new car models.
Industrial footwear
This division continues to generate above average returns through tight cost
control and excellent marketing of its brands.
Hosaf Fibres
Difficult conditions were experienced in the polyester industry worldwide. The
division achieved a modest profit, but the board is satisfied with the results.
Long term plans have been put into place to reduce operating and raw material
input costs.
Consumer division
Fashion and sport footwear
This division has achieved increased profits mainly as a result of improved
margins and buoyant consumer demand for fashion footwear. The strong Rand has
benefited the division by allowing it to import materials and product cheaper.
A consistent focus on nurturing and developing strong brands has been a core
driver of this division.
Bull Brand Foods
Operating results for the year reflected a significant improvement. The cannery
continued its acceptable growth in earnings. The fresh meat division recorded a
pleasing turnaround after the collapse of local red meat prices in 2003. The
turnaround was as a result of meat prices stabilising, reduced costs in
purchasing cattle for the feedlots, and increased volume which generated
economies of scale, improved operating efficiencies and cost control.
Glodina
Over the last three years Glodina has consistently improved its financial
performance.
This has been achieved mainly through:
* an introduction of new capital to invest in new plant and equipment
* improvement in operating efficiencies
* significant improvement in staff morale
* cost cutting and effective raw material sourcing.
Corporate action
The group has been successfully transformed with the formation of a solid base
of diversified industrial and consumer companies capable of maintaining an
acceptable growth in earnings per share. The automotive and footwear operating
entities of Feltex, Jordan & Co, Hosaf and Glodina were acquired with effect
from 1 July 2004.
Corporate governance
The directors endorse the principles advocated by the Code of Corporate
Practice and Conduct set out in the King report on Corporate Governance (King
II). During the period under review the board has made significant progress in
its efforts to comply with the Code in full and by year end complied in all
material aspects.
Social responsibility
Social responsibility programmes are in place at operating entity level aimed
at benefiting the community from which labour is drawn.
Black economic empowerment
The group continued its black economic empowerment initiatives and Motseng
Investment Holdings (Proprietary) Limited acquired an initial 14 million shares
(3,35% equity stake).
Directorate
Messrs C L Campher and A Z Keyser have resigned with effect 12 November 2004.
The board thanks both directors for their valuable contribution and looks
forward to their continued positive input in their respective operational
responsibilities as chief executives of Bull Brand Foods and Feltex Automotive
Leathers. Messrs M J Jooste, J B Magwaza, F Moller, I N Moloto and S H Nomvete
were appointed as non-executive directors with effect 12 November 2004. Mr C E
Daun was appointed non-executive chairman and P C T Schouten remains as chief
executive officer.
Dividend
The board has resolved to declare a capitalisation share award with a cash
alternative of 5 cents per share. The dividend policy of the group is to have
a payout ratio of 20% of headline earnings and to declare dividends annually,
with no interim dividend.
Prospects
The industrial business is anticipated to grow in line with further volume
growth in vehicle build in South Africa. The consumer business is expected
to continue to benefit from strong retail demand. KAP International is thus
well placed to achieve further growth in earnings for 2005.
For and on behalf of the board
C E Daun P C T Schouten
Chairman Chief executive officer
Declaration of capitalisation share award with dividend election option
The board has resolved to award capitalisation shares to shareholders recorded
in the register at the close of business on Friday, 20 May 2005 (`the share
award`). Shareholders will, however, be entitled to decline the share award or
any part thereof and instead elect to receive a cash dividend of 5 cents per
share. The terms of the share award will be announced on Thursday, 28 April
2005 and a circular regarding the share award incorporating an election form
will be posted to registered shareholders on the same date.
To comply with the requirements of STRATE the following dates are applicable:
Last day to trade cum-dividend Friday, 13 May 2005
Trading commences ex-dividend Monday, 16 May 2005
Closing date for the election of cash or
capitalisation shares at 12h00 Friday, 20 May 2005
Record date Friday, 20 May 2005
Payment of dividend/issue of shares Monday, 23 May 2005
Announcement of the results
of the share award - on SENS Monday, 23 May 2005
- in the press Tuesday, 24 May 2005
Share certificates may not be dematerialised or rematerialised between
Monday, 16 May 2005 and Friday, 20 May 2005, both days inclusive.
All dematerialised shareholders should, in accordance with their relevant
custody agreement, timeously inform their CSDP`s or brokers of their choice.
For and on behalf of the board
M Balladon
Company secretary
14 March 2005
Corporate information
Non-executive directors: C E Daun* (Chairman), M J Jooste, J B Magwaza,
I N Moloto, F Moller*, S H Nomvete
Executive directors: P C T Schouten (CEO), R D Radford
*German
Registration number: 1978/000181/06 Share code: KAP ISIN number: ZAE 000059564
Registered address: 3 Condale Road, Krugersdorp, 1739
Postal address: PO Box 3639, Paarl, 7620
Telephone: 021 872 8726
Business address: New Link Centre, 1 New Street, Paarl, 7646
Facsimile: 021 872 8904
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited
Telephone: 011 370 5000
Address: 70 Marshall Street, Johannesburg, 2001
Facsimile: 011 327 3003
Postal address: PO Box 61051, Marshalltown, 2107
Sponsor: PSG Capital Limited
