| Thu 15 Sep 2005, 16:06 | | KAP International Holdings Ltd - Interim Results F |
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KAP International Holdings Ltd - Interim Results For The Six Months Ended 30
June 2005
KAP INTERNATIONAL HOLDINGS LTD
Registration number: 1978/000181/06
Share code: KAP ISIN: ZAE 000059564
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005
* HEADLINE EARNINGS PER SHARE INCREASE BY 61%
* ACQUISITIONS BOOST REVENUE TO R1,4 BILLION (2004: R0,4 BILLION)
* OPERATING PROFIT OF R77 MILLION (2004: R19,3 MILLION)
Abridged group balance sheet
30 Jun 30 Jun 31 Dec
2005 2004 2004
Restated for IFRS
R million Reviewed Unaudited Audited
Assets
Non-current assets 631,7 103,9 595,9
Property, plant and equipment
and investment properties 483,6 89,8 441,2
Investments and loans 21,6 14,1 25,4
Deferred taxation 126,5 - 129,3
Current assets 1 052,8 300,6 998,1
Inventories and biological assets 511,9 167,3 456,1
Receivables and prepayments 519,8 109,6 497,0
Cash and cash equivalents 21,1 23,7 45,0
Total assets 1 684,5 404,5 1 594,0
Equity and liabilities
Equity 971,9 257,0 921,4
Equity holders` interest 962,3 256,9 912,4
Minority interest 9,6 0,1 9,0
Non-current liabilities 148,4 17,4 127,6
Interest-bearing borrowings 95,5 0,2 78,5
Retirement benefit obligations 40,8 9,9 40,6
Deferred taxation 12,1 7,3 8,5
Current liabilities 564,2 130,1 545,0
Short-term borrowings 24,7 37,0 118,6
Trade and other payables 345,8 89,2 350,4
Provisions 33,6 3,9 30,7
Bank overdrafts 160,1 - 45,3
Total equity and liabilities 1 684,5 404,5 1 594,0
Net asset value per share (cents) 227 153 218
Abridged group cash flow statement
30 Jun 30 Jun 31 Dec
2005 2004 2004
Restated for IFRS
R million Reviewed Unaudited Audited
Cash flows from operating activities 42,9 19,0 89,9
Cash generated from operations
before working capital changes 96,8 21,7 162,3
Net working capital changes (44,2) (0,4) (48,2)
Cash generated from operations 52,6 21,3 114,1
Net finance costs (8,3) (0,3) (10,6)
Taxation paid (1,4) (2,0) (13,6)
Cash flows from investing activities (94,9) 0,4 (474,1)
Acquisition of subsidiaries,
net of cash acquired - - (444,2)
Purchase of property,
plant and equipment (62,7) (2,9) (62,9)
Other investing activities (32,2) 3,3 33,0
Cash flows from financing activities (86,7) (32,9) 346,5
Decrease in borrowings (78,0) (32,9) (27,3)
Dividends paid (8,7) - -
Proceeds on share issue - - 373,8
Net decrease in cash and equivalents (138,7) (13,5) (37,7)
Opening cash and equivalents (0,3) 37,2 37,4
Closing cash and equivalents (139,0) 23,7 (0,3)
Notes
30 Jun 30 Jun 31 Dec
2005 2004 2004
Restated for IFRS
R million Reviewed Unaudited Audited
1. Net finance costs 8,3 0,3 10,6
Interest received (10,4) (2,4) (8,8)
Interest paid 18,7 2,7 19,4
2. Capital expenditure commitments 90,1 - 44,7
Contracted 71,5 - 24,5
Approved but not yet contracted 7,6 - 20,2
3. Operating lease commitments 28,1 - 67,2
4. Guarantees and contingent
liabilities 10,6 2,7 4,4
5. Taxation 10,8 1,8 19,8
Current taxation
- in respect of current period profits 1,6 1,8 2,2
- over provision prior period (3,0) - -
Deferred taxation
- in respect of current period profits 16,0 - 16,8
- raised in respect of assessed losses (10,1) - -
Secondary tax on companies 2,6 - 0,8
Effect of tax rate change 3,7 - -
6. Reviewed results
The results for the half year ended 30 June 2005 have been reviewed by Deloitte
& Touche. The unqualified review report is available for inspection at the
registered office of the company.
Segmental analysis
Operating Total
R million Revenues % profit % assets %
June 2005
(reviewed) 1 416,3 100 77,0 100 1 684,5 100
Industrial 882,7 62 53,9 70 1 008,9 60
Consumer 532,6 38 23,0 30 587,3 35
Other 1,0 - 0,1 - 88,3 5
June 2004
(unaudited,
restated for
IFRS) 427,1 100 19,3 100 404,5 100
Industrial 133,3 31 22,6 117 150,1 37
Consumer 293,8 69 3,5 18 238,3 59
Other - - (6,8) (35) 16,1 4
December 2004
(audited,
restated for
IFRS) 1 911,9 100 149,3 100 1 594,0 100
Industrial 1 022,3 53 105,7 70 943,3 59
Consumer 894,7 47 43,2 30 541,7 34
Other (5,1) - 0,4 - 109,0 7
Abridged group income statement
6 months 6 months 12 months
ended ended ended
30 Jun 30 Jun 31 Dec
2005 2004 2004
Restated for IFRS
R million Reviewed Unaudited Audited
Revenue 1 416,3 427,1 1 911,9
Operating profit 77,0 19,3 149,3
Negative goodwill from acquisitions - - 181,8
Net finance costs (8,3) (0,3) (10,6)
Share of results of joint ventures 1,1 - 1,2
Profit before taxation 69,8 19,0 321,7
Taxation (10,8) (1,8) (19,8)
Net profit 59,0 17,2 301,9
Attributable to ordinary shareholders 56,8 17,1 299,7
Attributable to minorities 2,2 0,1 2,2
Reconciliation of headline earnings
Net profit attributable
to ordinary shareholders 56,8 17,1 299,7
Profit on sale of property,
plant and equipment (0,1) (0,2) (2,5)
Impairment of property released - (0,4) -
Sale of subsidiaries - (2,4) (3,1)
Negative goodwill - - (181,8)
Headline earnings 56,7 14,1 112,3
Number of shares (thousand)
in issue 423 258 168 120 418 720
weighted average 421 477 168 120 293 412
Earnings per share (cents) 13,5 10,2 102,1
Headline earnings per share (cents) 13,5 8,4 38,3
Dividends per share (cents) - - 5,0
Abridged statement of changes in equity
6 months 6 months 12 months
ended ended ended
30 Jun 30 Jun 31 Dec
2005 2004 2004
Restated for IFRS
R million Reviewed Unaudited Audited
Balance at the beginning
of the period 921,4 238,9 238,9
Balance at the beginning of the
period as previously stated 879,1 203,7 203,7
Reclassification of minorities`
interests in equity 9,0 0,1 0,1
Cumulative effects of IFRS adoption 33,3 35,1 35,1
Shares issued during the period 13,8 - 375,9
Share issue costs - - (2,0)
Minority shareholders acquired - - 6,6
Movement in foreign currency
translation reserve 0,2 0,9 0,1
Net profit for the period 59,0 17,2 301,9
Net profit for the period
as previously stated 59,0 16,4 301,4
Effects of IFRS adoption - 0,8 0,5
Dividends paid (20,9) - -
Dividends paid to minorities (1,6) - -
Balance at the end of the period 971,9 257,0 921,4
Reconciliation of previous GAAP to IFRS
Basis of preparation
The reviewed results of the group for the six months ended 30 June 2005 have
been prepared in accordance with the accounting policies of the group, which
fully comply with International Financial Reporting Standards (IFRS). The group
is reporting under IFRS for the first time for the year ending 31 December 2005.
Comparative figures have accordingly been restated.
The disclosures required by IFRS 1 (First-time Adoption of International
Financial Reporting Standards) concerning the transition from South African
Statements of Generally Accepted Accounting Practice (SA GAAP) to IFRS and the
required changes in accounting policies are set out in the table below.
12 months 6 months IFRS
ended ended transition
31 Dec 30 Jun 1 Jan
2004 2004 2004
R million Audited Unaudited Audited
Balance sheet
Equity
Equity as previously reported
- SA GAAP 879,1 221,0 203,7
Restatements for IFRS 33,3 35,9 35,1
Property, plant and equipment 32,3 34,3 34,1
Investment property 9,3 8,8 8,2
Deferred taxation assets (5,5) - -
Deferred taxation liabilities (2,8) (7,2) (7,2)
Equity holders` interest 912,4 256,9 238,8
Minority interests in
subsidiaries previously
reported outside of equity 9,0 0,1 0,1
Restated equity - IFRS 921,4 257,0 238,9
Income statement
Net profit as previously
reported - SA GAAP 301,4 16,4
Restatements for IFRS 0,5 0,8
Change in depreciation rates 10,9 0,9
Negative goodwill (8,2) -
Deferred taxation (4,4) (0,1)
Minorities` interests 2,2 -
Restated net profit - IFRS 301,9 17,2
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
of 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 a 61% increase in headline earnings
per share to 13,5 cents for the six months to 30 June 2005. The adoption of
IFRS has resulted in the prior year headline earnings per share of 8 cents
being restated to 8,4 cents. Businesses acquired with effect from 1 July 2004
added R965 million to revenue and R52 million to operating profit for the six
month period. Operations in the group prior to 1 July 2004 increased revenue by
6% and operating profit by 28%.
The group has invested in
* new equipment which has been installed in the automotive segment in
anticipation of the additional volumes that will be generated from new
export vehicle models;
* increasing the size of the cattle herd at Bull Brand Foods to enhance
economies of scale and grow revenue; and
* repaying all shareholder loans to take advantage of more favourable sources
of funding.
These investments have resulted in a cash utilisation of R139 million for the
period. However, cash generated from operations remains robust, with the
debt/equity ratio deteriorating only slightly from 21 to 26%. The strong
debt/equity ratio, together with an interest cover of nine times, are
indicative of the strength of the balance sheet.
Industrial division
Automotive
Acceptable operating margins were achieved. Contracts for export models which
have now been secured will generate significant additional volumes from the
second half of 2005.
Industrial footwear
This division continues to generate acceptable returns despite pressure on
margins from merchandise imported from China.
The installation of new machinery has already enhanced efficiencies at the
gumboot plant and capital expenditure planned for the fourth quarter of 2005
will further improve margins.
Hosaf Fibres
Hosaf has almost quadrupled its PET capacity from 12 000 to 50 000 tons per
annum over the last two years. Market share and revenue have therefore
increased which, together with improved operating efficiencies and reduced
waste at its modern plants, have contributed to better earnings.
Consumer division
Fashion and sport footwear
Jordan has managed to maintain its profit margin through a solid growth in the
sales of both its own and international brands for which the distribution
rights are held. A ladies` shoe division has been launched which has already
contributed to profit for the current period and is expected to grow steadily.
Bull Brand Foods
Operating results of the Fresh Meat division exceeded expectations primarily
due to stable meat prices, favourable feed cost and enhanced efficiencies.
Canned meals maintained acceptable domestic growth despite increased pressure
on margins due to rising input costs.
An aggressive programme of new product launches has been initiated to grow
market share and capitalise on the strength of its brands.
Glodina
Improved operating margins have been achieved due to better production
efficiencies and increased revenue in the current favourable retail
environment.
Corporate action
It was previously announced that during July 2005 the group entered into an
agreement to acquire the properties occupied by the Feltex manufacturing
operations from Courthiel Holdings (Proprietary) Limited, a related party, for
R55,1 million. For operational reasons one property is no longer being acquired
and the total purchase consideration is now R 44,1 million. The cancellation of
the acquisition of this property does not effect the fair and reasonable
opinion of PSG Capital Limited and its impact on the proforma financial effects
on KAP is not significant (below 3%). Feltex has a need for continued
expansion of capacity and the flexibility to do so is better achieved if the
properties are owned.
The group also entered into an agreement to dispose of its properties occupied
by African Hide Trading (Proprietary) Limited, a related party, for
R5,5 million. These properties are not considered core to the business of the
group.
Dividend
In accordance with group policy, no interim dividend will be declared.
Prospects
Volume growth in vehicle manufacture in South Africa, together with strong
retail demand and low interest rates, bode well for earnings growth of the
group. Shareholders are reminded that KAP`s peak profit generation is in the
second half of the year due to the cyclical nature of the business.
For and on behalf of the board
C E Daun P C T Schouten
Chairman Chief executive officer
15 September 2005
Non-executive directors: C E Daun* (Chairman), M J Jooste, J B Magwaza,
I N Mkhari, F Moller*, S H Nomvete *German
Executive directors: P C T Schouten (CEO), R D Radford
Registered address: First Floor
New Link Centre
1 New Street
Paarl, 7646
Telephone: 021 872 8726
Postal address: PO Box 3639
Paarl, 7620
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
www.kapinternational.com
Date: 15/09/2005 04:00:38 PM
Produced by the JSE SENS Department
