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KAP
KAP
KAP - Audited Group Results and Final Distribution Declaration for the Year
Ended 31 December 2005
KAP International Holdings Ltd
Registration number: 1978/000181/06
Share code: KAP
ISIN: ZAE000059564
Audited Group Results and Final Distribution Declaration for the Year Ended
31 December 2005
HEADLINE EARNINGS PER SHARE UP BY 36%
REVENUE OF R3,0 BILLION (2004: R1,9 BILLION)
HEADLINE EARNINGS OF R194 MILLION (2004: R99 MILLION)
FINAL DISTRIBUTION OF 12 CENTS PER SHARE (2004: 5 CENTS)
STRONG OPERATING CASH FLOWS
Balance sheet
31 Dec 2005 31 Dec 2004
Restated
Rm Rm
Assets
Non-current assets 696,0 557,4
Property, plant and equipment and investment
properties 529,5 410,3
Investments and loans receivable 26,6 25,2
Pension fund surplus 45,0 -
Deferred taxation 94,9 121,9
Current assets 1 056,9 988,0
Inventories and biological assets 539,1 450,1
Receivables and prepayments 515,6 492,9
Cash and cash equivalents 2,2 45,0
Total assets 1 752,9 1 545,4
Equity and liabilities
Capital and reserves 1 058,5 863,6
Ordinary shareholders" equity 1 044,5 854,2
Minority interest 14,0 9,4
Non-current liabilities 119,9 132,1
Long-term borrowings 81,4 85,2
Retirement benefit obligations 19,8 40,6
Deferred taxation 18,7 6,3
Current liabilities 574,5 549,7
Trade and other payables 371,2 350,1
Bank overdrafts 112,9 45,3
Short-term borrowings 50,7 118,9
Provisions 39,7 35,4
Total equity and liabilities 1 752,9 1 545,4
Number of shares
- in issue (000) 423 266 418 720
- weighted average (000) 421 477 293 412
Net asset value per share (c) 246,8 204,0
Net interest-bearing debt to equity (%) 22,0% 20,7%
Cash flow statement
Year ended Year ended
31 Dec 2005 31 Dec 2004
Restated
Rm Rm
Cash flows from operating activities 110,5 96,3
Cash generated from operations
before working capital changes 218,5 164,8
Net working capital changes (85,5) (44,4)
Cash generated from operations 133,0 120,4
Net finance costs (19,4) (10,6)
Taxation paid (3,1) (13,5)
Cash flows from investing activities (139,1) (474,1)
Acquisition of subsidiaries,
net of cash acquired - (444,2)
Acquisition of property,
plant and equipment
- replacement (26,0) (27,9)
- expansion (139,2) (35,0)
Other investing activities 26,1 33,0
Cash flows from financing activities (81,8) 340,3
Decrease in borrowings (73,1) (33,5)
Dividends paid, net of capitalisation issue (8,7) -
Proceeds on share issue - 373,8
Net decrease in cash and cash equivalents (110,4) (37,5)
Opening cash and cash equivalents (0,3) 37,2
Closing cash and cash equivalents (110,7) (0,3)
Statement of changes in equity
Year ended Year ended
31 Dec 2005 31 Dec 2004
Restated
Rm Rm
Balance at the beginning of the year 863,6 229,5
Shares issued during the year 13,8 375,9
Share issue costs - (2,1)
Share-based payment reserve 1,1 11,8
Minorities in subsidiaries acquired - 7,1
Movement in foreign currency
translation reserve - 0,1
Net profit for the year 202,5 241,3
Dividends paid (22,5) -
Balance at the end of the year 1 058,5 863,6
Income statement
Year ended Year ended
31 Dec 2005 31 Dec 2004
Restated
Rm Rm
Revenue 2 997,9 1 911,9
- continuing operations 2 949,9 1 862,0
- discontinued operations 48,0 49,9
Operating profit 227,7 140,6
- continuing operations 238,5 153,2
- discontinued operations (10,8) (12,6)
Negative goodwill from acquisitions - 134,7
Pension fund surplus (net) 50,6 -
Discontinued operation closure costs (10,9) -
Net finance costs (19,4) (10,6)
Share of results of joint ventures 0,7 1,2
Profit before taxation 248,7 265,9
Taxation (46,2) (24,6)
Net profit for the year 202,5 241,3
- continuing operations 215,4 255,9
- discontinued operations (12,9) (14,6)
Net profit for the year 202,5 241,3
Attributable to KAP shareholders 196,3 239,1
Attributable to minorities 6,2 2,2
Reconciliation of headline earnings
Profit attributable to
equity holders of the parent 196,3 239,1
Adjusted for the after-tax effects of:
Profit on disposal of property,
plant and equipment (12,0) (2,2)
Profit on disposal of subsidiaries - (3,1)
Impairment of investment property 0,6 -
Discontinued operation closure costs 9,5 -
Negative goodwill - (134,7)
Headline earnings 194,4 99,1
Including discontinued operations
Earnings per ordinary share (cents) 46,6 81,5
Headline earnings per ordinary share (cents) 46,1 33,8
Excluding discontinued operations
Earnings per ordinary share (cents) 49,6 86,5
Headline earnings per ordinary share (cents) 49,2 38,8
Distribution per share - declared (cents) 12,0 5,0
Reconciliation of SA GAAP to IFRS
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.
Year IFRS
ended transition
31 Dec 2004 1 Jan 2004
Rm Rm
Balance sheet
Equity as previously reported under SA GAAP 879,1 203,7
Adjustments upon adoption of IFRS 1,1 30,4
Property, plant and equipment 8,4 34,1
Investment property 9,3 8,2
Deferred taxation assets (15,4) -
Deferred taxation liabilities (0,6) (11,9)
Minority interests (0,6) -
Equity holders" interest 880,2 234,1
Minority interests previously
reported outside of equity 9,4 0,1
Restated equity under IFRS 889,6 234,2
Restatement of business combinations* (21,1) -
Restatement of operating lease liability (4,9) (4,7)
Restated equity 863,6 229,5
Income statement
Net profit as previously
reported under SA GAAP 301,5
Change in depreciation rates 12,2
Negative goodwill (36,5)
Share-based payments expense (11,8)
Deferred taxation (4,8)
Minority share of income (0,2)
Restated net profit in terms of IFRS 260,4
Restatement in respect of business combinations* (21,1)
Restatement in respect of operating lease charges (0,2)
Restated net profit for the year 239,1
* Restatement of the business combination which occurred on 1 July 2004, due
to incorrect valuation of certain acquired assets and liabilities.
The adjustments relate to Dano Textile Industries (Pty) Ltd, Wayne Rubber
division of Feltex Holdings (Pty) Ltd and Hosaf Fibres (Pty) Ltd.
Notes
1.Capital expenditure commitments
Contracted 10,3 24,5
Approved but not contracted 23,0 20,2
2.Operating lease commitments 16,0 67,2
3.Guarantees and contingent liabilities - 4,4
4. Taxation
Taxation remains low in relation to reported profits mainly due to the
utilisation of assessed losses, non-taxable income and the raising of deferred
tax assets in respect of assessed losses.
5. Basis of preparation of the results
The audited results of the group for the twelve months ended 31 December 2005
have been prepared in accordance with the accounting policies of the group,
which comply with International Financial Reporting Standards (IFRS). The
group is reporting under IFRS for the first time for the year ended 31
December 2005. Comparative figures have accordingly been restated.
6. Audited results
The results for the year ended 31 December 2005 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
Revenue % profit % assets %
Rm Rm Rm
2005
Industrial 1 823,9 61 160,4 70 1 129,0 64
Consumer 1 197,5 40 68,3 30 660,9 38
Other (23,5) (1) (1,0) - (37,0) (2)
2 997,9 100 227,7 100 1 752,9 100
Capital
expenditure % Depreciation %
Rm Rm
2005
Industrial 132,4 80 33,6 80
Consumer 30,9 19 9,2 22
Other 1,9 1 (0,6) (2)
165,2 100 42,2 100
Operating Total
Revenue % profit % assets %
Rm Rm Rm
2004
Industrial 1 022,3 53 104,8 75 918,2 60
Consumer 894,8 47 39,8 28 549,1 36
Other (5,2) - (4,0) (3) 78,1 4
1 911,9 100 140,6 100 1 545,4 100
Capital
expenditure % Depreciation %
Rm Rm
2004
Industrial 48,8 78 18,0 77
Consumer 14,0 22 6,9 30
Other 0,1 - (1,6) (7)
62,9 100 23,3 100
Commentary
Review of results
The board of directors is pleased to report on the results for the year ended
31 December 2005. Headline earnings per share increased by 36% to 46,1 cents
compared to restated headline earnings per share.
Revenue increased from R1,9 billion to R3,0 billion, largely as a result of a
full year"s trading for the operations acquired on 1 July 2004.
Industrial segment
AUTOMOTIVE
The production of locally manufactured vehicles increased by 14,5% to a record
high of 497 000 units in 2005 (2004: 434 000 units) and was buoyed by the
launch of three new models. The division achieved its budget despite
significant raw material price increases and production disruptions caused by
the start-up of new contracts and the installation of new technology. The
Wayne Rubber division was discontinued during the year.
INDUSTRIAL FOOTWEAR
Although under threat from imports in the safety footwear market, the
industrial footwear division continues to produce acceptable margins on its
products. To complement their locally manufactured product offer, a strategic
decision has been taken to import footwear.
HOSAF FIBRES
Profitability has improved significantly from the prior year, despite
international pressure on dollar-denominated margins. However, management has
successfully improved efficiencies by maximising production capacity to
achieve good returns.
The sustained increase in worldwide demand for PET is expected to continue.
Hosaf Fibres remains committed to further growing its PET output by increasing
existing capacity.
Consumer segment
JORDAN & CO
Retail sales have surged in the year to the benefit of Jordan"s main brands of
Bronx, Jordan and Olympic. Intense margin pressure has been experienced as new
importers have entered the market. Jordan continues to replace capacity in its
own manufacture with increased footwear imports.
BULL BRAND FOODS
Strong local and export demand, underpinned by the largest ever generic beef
advertising campaign, resulted in not only favourable red meat prices but also
strong volume growth. Low maize prices also contributed to improved operating
margins.
GLODINA
Continued growth in the South African economy fuelled strong consumer demand
and a buoyant retail sector.
Glodina also began to reap the benefits of its 3 year capital expenditure
programme and sustained investment in staff training.
Balance sheet and cash flow
The balance sheet of the group remains strong, with an interest-bearing debt
to equity ratio of 22,0% (2004: 20,7%) and an interest cover of 11,7 times
(2004:13,3 times).
R165,2m was spent on property, plant and equipment which included R44,1m to
acquire the properties occupied by the Feltex manufacturing operations,
resulting in a significant decrease in operating lease commitments. A net
working capital investment of R85,5m included R32,9m to increase the
standing herd at Bull Brand in order to achieve economies of scale.
The apportionment of a pension fund surplus was authorised by the FSB during
the year. The total surplus amounted to R70,4m before taxation, of which
R19,8m was utilised to settle a portion of the post-retirement medical benefits
liability. The balance of the surplus will be used as a contribution holiday
with future cash benefits of R5,6m per annum.
Corporate action
On 30 November 2005, the Steinhoff International group acquired a strategic
equity stake of 21% in the group.
Potential synergies exist between the two groups, and these are currently
being identified.
In September 2005 the terms of an agreement were finalised in respect of the
acquisition of the properties occupied by the Feltex manufacturing operations
from Courthiel Holdings (Pty) Ltd and Conrapp Properties (Pty) Ltd, both
related parties to KAP, for R44,1m. In July 2005 the group entered
into an agreement to dispose of a non-core property to African Hide Trading
(Pty) Ltd, a related party to KAP, for R5,5m.
In November 2005, Motseng Investment Holdings (Pty) Ltd acquired a further 3%
of the equity of the company, increasing the company"s BEE shareholding to 6%.
Corporate governance
The board endorses the principles advocated by the Code of Corporate Practice
and Conduct set out in the King report on Corporate Governance (King II).
Social responsibility
The group is engaged in many social responsibility programmes at operating
division level.
Directors and officers
Rob Radford resigned from the group and the KAP board with effect from 22
September 2005. The board wishes to thank him for his contribution both to the
board and the group, and in particular for his leadership of the Feltex group.
Danie van der Merwe (MD of Steinhoff Africa) and John Haveman were appointed
to the board as a non-executive director and chief financial officer (CFO)
respectively, with effect from 25 November 2005.
Markus Jooste resigned as chairman of the audit committee, and was replaced by
Len Konar, an independent consultant and professional director of companies,
appointed on 3 March 2006. Jan van der Merwe, CFO of Steinhoff Holdings, was
also appointed to the KAP audit committee on 22 November 2005.
Capital distribution
Subject to the required shareholders" approvals, the board has declared a
distribution of 12 cents per share (2004: 5 cents). The distribution cover is
3,8 times (2004: 6,8 times). The policy of the group is to have a payout ratio
of approximately 25% of headline earnings and to declare distributions annually
after the year-end results have been finalised. After an initial period of
consolidation by the group during 2004, an improved payout ratio was considered
appropriate for 2005.
Prospects
The automotive division and Hosaf Fibres are in high-growth industries. Growth
in the automotive division is expected to be realised through increased
vehicle build in South Africa.
The PET industry has experienced growth rates of 8-10% over the last three
years, and it is expected that the national and international markets will
continue to grow by more than 7% and 10% respectively per annum.
Our strong brands in the consumer segment are well positioned to benefit from
the continued economic growth, strong consumer demand and buoyant retail
sector prevalent in South Africa.
The group is thus favourably placed for further growth in 2006.
For and on behalf of the board
C E Daun P C T Schouten
Chairman Chief executive officer
Capital distribution
The directors have declared, subject to the required shareholders" approvals, a
capital distribution of 12 cents per share, payable on Monday, 12 June 2006 to
shareholders recorded in the register at the close of business on Friday, 9 June
2006.
To comply with the requirements of STRATE the following dates are applicable:
2006
Last date to trade cum-distribution Friday, 2 June
Trading commences ex-distribution Monday, 5 June
Record date Friday, 9 June
Posting of cheques / electronic bank transfers Monday, 12 June
Share certificates may not be dematerialised or rematerialised nor may transfers
between registers take place between Monday, 5 June 2006 and Friday, 9 June
2006, both days inclusive.
Any change to the above dates and times will be advised by notification on SENS
and in the press.
For and on behalf of the board
M Balladon
Company secretary
10 March 2006
Corporate information
Non-executive directors: C E Daun* (Chairman), M J Jooste, D M van der Merwe,
J B Magwaza, I N Mkhari, S H Nomvete, F Moller* * German
Executive directors: P C T Schouten (CEO), J P Haveman (CFO)
Registration number: 1978/000181/06 Share code: KAP ISIN: ZAE000059564
Registered address: 1st floor, New Link Centre, 1 New Street, Paarl, 7646.
Postal address: PO Box 3639, Paarl, 7620. Telephone: 021 872 8726. Facsimile:
021 872 8904
Transfer secretaries: Computershare Investor Services 2004 (Proprietary)
Limited.
Address: 70 Marshall Street, Johannesburg, 2001. Postal address: PO Box 61051,
Marshalltown, 2107.
Telephone: 011 370 5000. Facsimile: 011 327 3003
Sponsor: PSG Capital Limited
Please see these results on www.kapinternational.com
Date: 10/03/2006 04:00:23 PM Produced by the JSE SENS Department
