| Wed 22 Nov 2006, 14:00 | | Nampak Limited - Audited group results for the yea |
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NPK
NPK
Nampak Limited - Audited group results for the year ended 30 September 2006
NAMPAK LIMITED
Registration number: 1968/008070/06
Share code: NPK
ISIN: ZAE000071676
Headline earnings per share up 72%
Profit from operations up 23%
Cash distribution/dividend up 15%
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006
CONDENSED GROUP INCOME STATEMENT
2006 2005
Restated Change
Rm Rm %
Revenue 15 261.9 15 113.7 1.0
Profit from operations before abnormal 1 508.6 1 311.0 15.1
items
Abnormal profit/(loss) 29.3 (63.8)
Profit from operations 1 537.9 1 247.2 23.3
Finance costs (185.4) (200.6)
Finance income 62.7 93.2
Income from investments 4.8 33.8
Share of profit of associates - 0.9
Profit before tax 1 420.0 1 174.5 20.9
Income tax 553.7 519.4
Profit for the year 866.3 655.1 32.2
Attributable to:
Equity holders of the company 861.8 651.3 32.3
Minority interest 4.5 3.8
866.3 655.1
Ordinary shares in issue (000) 653 726 669 314
Ordinary shares in issue - net of 581 235 641 888
treasury shares (000)
Weighted average number of ordinary
shares on which earnings per share are
based (000)
579 968 638 262
Weighted average number of ordinary
shares on which diluted earnings per
share are based (000)
615 117 642 385
Basic earnings per share (cents) 148.6 102.0 45.7
Fully diluted earnings per share 144.1 101.4 42.1
(cents)
Cash distribution/dividend per share 96.1 83.6 15.0
(cents)
DETERMINATION OF HEADLINE EARNINGS
2006 2005
Restated Change
Rm Rm %
Headline earnings per ordinary 151.2 88.0 71.8
share (cents)
Fully diluted headline earnings per 146.6 87.4 67.7
share (cents)
Profit attributable to equity
holders of the company for the year
861.8 651.3
Less: preference dividend (0.1) (0.1)
Basic earnings 861.7 651.2 32.3
Adjusted for:
Impairment losses on goodwill, 112.6 205.0
plant and equipment
Reversal of impairment losses on (2.0) (5.0)
plant and equipment
Net (profit)/loss on disposal of (0.7) 26.6
businesses
Net profit on disposal of property, (75.0) (410.3)
plant and equipment
Pension fund curtailment loss on - (17.6)
disposal of business
Write-off of due diligence costs - 5.7
Tax effects (19.6) 105.8
Headline earnings for the year 877.0 561.4 56.2
CONDENSED GROUP BALANCE SHEET
2006 2005
Restated
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment and investment 5 217.9 4 819.5
property
Goodwill and other intangible assets 1 093.3 1 062.3
Other non-current financial assets and 302.5 203.3
associates
Deferred tax assets 9.6 7.6
6 623.3 6 092.7
Current assets
Inventories 2 169.2 2 001.8
Trade and other receivables 3 121.0 2 504.1
Tax assets 64.2 60.7
Bank balances, deposits and cash 414.6 620.2
5 769.0 5 186.8
Assets classified as held for sale 43.3 -
5 812.3 5 186.8
TOTAL ASSETS 12 435.6 11 279.5
EQUITY AND LIABILITIES
Capital and reserves
Capital reserves 1 076.2 2 156.6
Other reserves 195.4 (296.3)
Retained earnings 4 291.6 3 758.9
Equity attributable to equity holders of the 5 563.2 5 619.2
company
Minority interest 40.7 32.4
Total equity 5 603.9 5 651.6
Non-current liabilities
Loans and borrowings 1 021.8 929.7
Other non-current financial liabilities 18.9 26.7
Retirement benefit obligation 721.9 540.7
Deferred tax liabilities 683.4 657.3
2 446.0 2 154.4
Current liabilities
Trade, other payables and provisions 3 038.7 3 002.0
Bank overdrafts and loans 978.8 279.3
Tax liabilities 363.1 192.2
4 380.6 3 473.5
Liabilities directly associated with assets 5.1 -
classified as held for sale
4 385.7 3 473.5
TOTAL EQUITY AND LIABILITIES 12 435.6 11 279.5
Significant statistics
Net gearing 28% 11%
Interest cover 13 times 12 times
Total liabilities: equity 121% 99%
Net worth per ordinary share (cents)
calculated on ordinary shares
in issue - net of treasury shares 964 880
Tangible net worth per ordinary share (cents)
calculated on ordinary shares in issue - net
of treasury shares
776 715
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
2006 2005
Restated
Rm Rm
Exchange differences on translation of foreign 562.0 (102.9)
operations
Net actuarial losses (net of tax) (92.1) (33.5)
Hyper-inflation capital adjustment (2.4) (89.7)
Gains on cash flow hedges 29.5 1.4
Net income/(expense) recognised directly in 497.0 (224.7)
equity
Profit for the year 866.3 655.1
Total recognised income and expense for the year 1 363.3 430.4
Attributable to:
Equity holders of the company 1 353.5 429.7
Minority interest 9.8 0.7
1 363.3 430.4
CONDENSED GROUP CASH FLOW STATEMENT
2006 2005
Restated
Rm Rm
Cash generated from operations 1 734.9 2 026.0
Net interest paid (128.5) (100.3)
Income from investments 4.8 33.8
Retirement benefit contributions and (40.1) (81.6)
settlements
Tax paid (364.2) (418.7)
Replacement capital expenditure (299.1) (361.5)
Cash retained from operations 907.8 1 097.7
Dividends paid (330.6) (536.1)
Cash distribution paid (174.4) -
Net cash retained from operating activities 402.8 561.6
Net cash (utilised in)/retained from (151.6) 168.5
investing activities
Net cash retained before financing activities 251.2 730.1
Net cash utilised in financing activities (1 051.0) (306.4)
Net (decrease)/increase in cash and cash (799.8) 423.7
equivalents
Cash and cash equivalents at beginning of 364.8 (38.9)
year
Translation of cash in foreign subsidiaries (70.1) (20.0)
Cash and cash equivalents at end of year (505.1) 364.8
NOTES
2006 2005
Restated
Rm Rm
1. Abnormal profit/(loss)
Net impairment losses on goodwill, plant and (110.6) (200.0)
equipment
Share-based payment expense on BEE (21.0) (219.5)
transaction
Retrenchment and restructuring costs (3.1) (150.0)
Financial instruments fair value adjustment 88.6 (10.5)
Net profit on disposal of property 71.7 397.5
Net monetary adjustment - hyper-inflation 3.0 (2.2)
Net profit/(loss) on disposal of businesses 0.7 (26.6)
Pension fund curtailment gain on restructure - 70.2
Change in estimates - provisions - 59.7
Pension fund curtailment loss on disposal of - 17.6
business
29.3 (63.8)
2. Cash and cash equivalents
Bank overdrafts and loans (978.8) (279.3)
Less short-term portion of long-term 59.9 23.9
liabilities
Less bank balances, deposits and cash 414.6 620.2
Net cash and cash equivalents included in
non-current assets held for sale
(0.8) -
(505.1) 364.8
3. Supplementary information
Depreciation 589.9 584.3
Amortisation 68.5 57.5
Capital expenditure 689.4 747.4
- expansion 390.3 385.9
- replacement 299.1 361.5
Capital commitments 962.1 435.5
- contracted 337.0 166.4
- approved not contracted 625.1 269.1
Lease commitments 414.5 497.3
- land and buildings 367.4 341.2
- other 47.1 156.1
Contingent liabilities 756.9 22.9
- customer claims and guarantees 10.6 22.9
- tax contingent liabilities 746.3 -
4. Tax contingent liabilities
The South African Revenue Service ("SARS") has raised assessments against a
number of companies in the group, covering three broad areas.
The first area of assessment relates to Malbak Limited and a number of its
subsidiary companies, which were acquired by the group in August 2002, in
respect of transactions which took place between 1991 and 2001. SARS is
claiming tax on deemed interest and alleged foreign exchange gains on loans
made to an indirect, offshore subsidiary of Malbak, donations tax on the
sale by Malbak of its rigid plastic business in 2001 and donations tax on
the write-off of loans made to a number of employee share trusts which were
set up in the Malbak group. In respect of the Malbak assessments the group
has investigated each transaction and has taken legal opinion, including two
senior counsel. As a result, the group is confident that it can successfully
defend against these assessments. Objections were lodged against all the
assessments with SARS. An amount of R50 million has been paid to SARS on a
without prejudice basis and a suspension of further payment obligations has
been granted at least until the objections have been considered by SARS.
In the second area of assessment SARS is seeking to tax the profits made by
Metal Box Botswana (Pty) Limited in the years 1996 to 2001 on the grounds
that Metal Box Botswana was effectively managed in South Africa and did not
have a permanent establishment in Botswana. Again the group is confident
that it can successfully defend against this assessment and an objection has
been lodged with SARS.
In the third area of assessment SARS is seeking to tax the portion of the
insurance proceeds arising from the fire at the glass furnace in 2004 that
is considered capital in nature. In addition, SARS is seeking to tax some of
the proceeds earlier than the date on which these amounts were included in
the tax return. The group is still in the process of reviewing the facts
but, based on a preliminary assessment, is confident that it can
successfully defend against this assessment. An objection will be lodged in
due course.
The tax contingent liabilities include R243.8 million for tax, R128.7
million for penalties and R373.8 million for interest.
COMMENTS
IFRS RESTATEMENT
The 2005 financial results have been restated to comply with International
Financial Reporting Standards ("IFRS"). The profit from operations was
restated from R1 356 million to R1 247 million. The main items affecting the
income statement restatement are commented on under the respective
geographical overviews below.
NAMPAK PROFILE
Nampak is the largest and most diversified packaging manufacturer in Africa
with extensive manufacturing operations in South Africa and a further 11
countries on the African continent. It produces packaging products from
metal, glass, paper and plastics and is a major manufacturer and marketer of
tissue products.
It is one of the leading suppliers of folding cartons to the food and
healthcare sectors in Europe and it is the major supplier of plastic bottles
to the dairy industry in the United Kingdom.
The group is actively engaged in the collection and recycling of all forms
of used packaging.
KEY INVESTMENT ACTIVITIES IN 2006
In order to mitigate the dilutive effect of the BEE transaction concluded in
2005, the group implemented a scheme of arrangement whereby it repurchased
10% of its issued shares from existing shareholders effective 31 October
2005 for a consideration of R964 million.
Effective 1 October 2005, Wiegand-Glas of Germany acquired 50% of the issued
share capital in Nampak Glass (Pty) Limited for Euro18 million.
Tufbag, which manufactures bulk bags, was sold effective 1 November 2005 for
R11 million.
Effective 28 February 2006, the group disposed of its Contract Packing
business in Europe for GBP0.6 million.
Effective 1 October 2006 the Flexpak business at Bellville in the Western
Cape was sold to Transpaco for R56 million, subject to approval by the
Competition Commission.
Effective 1 October 2006, the group exercised its call option to acquire for
R23.6 million the remaining 50% of the shares in Burcap Plastics (Pty)
Limited which it did not already own. This transaction is subject to
approval by the Competition Tribunal.
GEOGRAPHICAL PERFORMANCE
Geographical overview
Profit from Operating
Revenue operations margin %
2006 2005 2006 2005 2006 2005
Rm Restated Restated Restated
South Africa 10 501 10 896 1 175 784 11.2 7.2
Rest of 892 609 92 58 10.3 9.5
Africa
Europe 4 157 3 810 271 405 6.5 10.6
Intergroup (288) (201)
eliminations
Total 15 262 15 114 1 538 1 247 10.1 8.3
Group
The group is pleased to report a good improvement in performance following
the realisation of benefits from the restructuring and business realignment
of the past few years. In 2005 profit from operations in Europe included
R375 million profit on the sale of properties which did not recur in 2006.
Excluding Peters Papers, Tufbag, Contract Packing and 50% of Nampak Glass,
sales from continuing operations increased by 6% to R15.3 billion and profit
from operations before abnormal items increased by 15% as a result of an
improved performance from all regions. The operating margin before abnormal
items improved to 10.0% from 9.0%.
Net financing costs increased by 14% to R123 million largely as a result of
increased borrowings following the share repurchase and higher interest
rates in South Africa.
Taxation increased to R554 million from R519 million whilst the effective
tax rate decreased to 39.0% from 44.2%. The effective tax rate was impacted
by an increase in provisions and lower Secondary Tax on Companies ("STC")
following the payment of the 2006 interim cash distribution out of share
premium.
Headline earnings per share increased by 72% to 151.2 cents compared to 88.0
cents in 2005, which was restated to comply with IFRS. Headline earnings per
share in 2005 as previously reported under SA GAAP was 119.2 cents.
Cash generated from operations was R1.7 billion. Net gearing increased from
11% to 28% mainly as a result of the share repurchase.
South Africa
There was good growth in expenditure on non-durable products but rand
strength for most of the year resulted in some of the demand being satisfied
by imported products. Exports of both packaging and packaged goods were
negatively affected by the relative strength of the currency.
Packaging volumes grew by 0.5% with good gains in beverage cans and rigid
plastics offset by lower demand for food cans, flexible packaging and paper
packaging. Glass bottle volumes were affected by upgrading of equipment
which will improve production in the year ahead.
There was strong demand for toilet tissue and diapers.
Tinplate prices increased marginally but there was a significant increase in
the price of aluminium. Polymer prices increased substantially as a result
of the rise in oil prices. There were minor increases in the price of paper
used to manufacture corrugated boxes. The gross margin percentage was
maintained through some price increases and improved efficiencies.
Profit from operations increased by 50% partly as a result of restating 2005
to comply with IFRS but also due to benefits from the restructuring and
business realignment undertaken in the past few years. Included in the IFRS
restatements are share-based payments of R225 million, a reduction of R43
million in the depreciation charge, an impairment of assets of R53 million
and other expenses of R36 million.
Rest of Africa
In general, the performance of the businesses in the rest of Africa
improved, particularly the new cartons factory in Nigeria. Zimbabwe
continued to be adversely affected by the economic difficulties in the
country. Profit from operations in 2005 was negatively impacted by R14
million in IFRS adjustments, mainly due to the reclassification of two
Zimbabwe companies from joint ventures to associate companies.
Europe
The European countries in which we operate enjoyed steady economic growth
but trading conditions remained highly competitive. Market share in
healthcare and plastic milk bottles increased.
Sales benefited from the inclusion, for a full twelve months, of the two
plastic bottle in-plant operations acquired in 2005. Although trading-level
profit improved, profit from operations was lower, as 2005 included R375
million profit on the sale of properties which did not recur in 2006.
The restatement of the prior year results for IFRS included a R195 million
decrease in the loss on the defined benefit pension fund following the
disposal of the "short-run" plastics business, a decrease of R31 million on
the disposal of properties and other net gains of R10 million.
Segmental Analysis
Metals and Glass
Profit from Operating
Revenue operations margin %
2006 2005 2006 2005 2006 2005
Rm Restated Restated Restated
Africa 4 434 4 365 700 637 15.8 14.6
Africa
The profit from operations includes gains on the fair value of financial
instruments. 2005 included 100% of the glass business, 50% of which was sold
to Wiegand-Glas on 1 October 2005. There were also substantial impairment
costs in 2005.
Beverage can volumes to South African customers were up 3% on last year.
Good demand from the carbonated soft-drinks and other sectors was partly
offset by lower demand for beer cans.
Beverage container closures enjoyed good demand from growth in the
carbonated soft-drink and sports-drink markets. Sales of closures for baby
foods also experienced strong demand.
Sales of fish cans, which were affected by lower catches in the first half,
recovered in the second half but were still lower in total than in 2005.
Demand for fruit cans was affected by poor crops whilst sales of vegetable
cans improved on last year. Aluminium aerosol cans benefited from buoyant
consumer spending. Paint can sales volumes continued to be affected by the
ongoing conversion to plastic.
The Nigerian metals business performed well but both Kenya and Zambia were
impacted by strong local currencies which placed pressure on margins.
In the glass bottle business, significant investment was made in upgrading
the cold-end equipment on the second furnace. Although this affected results
in 2006 it will lead to improved manufacturing efficiencies and higher
factory output in the year ahead.
Paper
Profit/(loss) Operating
from
Revenue operations margin %
2006 2005 2006 2005 2006 2005
Rm Restated Restated Restated
Africa 4 415 4 539 349 226 7.9 5.0
Europe 2 613 2 564 86 (120) 3.3 (4.7)
Total 7 028 7 103 435 106 6.2 1.5
Africa
The prior year included Peters Papers for five months before its disposal
and substantial costs relating to restructuring. The improvement in profits
in 2006 is partly due to good cost-management and to fair value gains of
financial instruments. There were improved performances from the major paper
businesses, corrugated, cartons and labels and tissue.
Sales of corrugated boxes were below expectations due partly to a poor
agricultural season and weak demand from the industrial and commercial
sectors.
Sales volumes of cartons and labels grew in the year. There was strong
demand for fast-food packaging which has benefited from increased consumer
spending and a move away from the use of polystyrene.
Sales of paper sacks did not keep pace with the strong demand for cement due
to importation of cement and operational difficulties at some customers.
Sales of cores and tubes were lower as a result of reduced demand for cores
for paper reels.
Buoyant consumer spending resulted in strong demand for toilet tissue and
disposable diapers.
The paper businesses in the rest of Africa generally improved their trading
position particularly the Nigerian cartons operation, which was fully
operational in its temporary site throughout 2006. The permanent factory
will be ready for occupation in early 2007.
The business in Zimbabwe continued to be adversely affected by ongoing
massive currency depreciation and hyper-inflation whilst in Malawi, sales of
new one-piece tobacco boxes contributed to an improved result.
Europe
The profit-improvement programme at the Leeds factory in the United Kingdom
contributed to a better performance from the European folding cartons
business. 2005 included significant restructuring costs and goodwill write-
off. Market share was gained in the healthcare packaging sector but margins
remained under pressure from consolidation in the pharmaceutical industry.
Plastics
Profit from Operating
Revenue operations margin %
2006 2005 2006 2005 2006 2005
Rm Restated Restated Restated
Africa 2 554 2 601 186 175 7.3 6.7
Europe 1 291 1 073 153 449 11.9 41.8
Total 3 845 3 674 339 624 8.8 17.0
Africa
Another good performance by rigid plastics was supported by better results
from flexible packaging. 2005 included Tufbag which was sold effective 1
November 2005. The plastics businesses in the rest of Africa did not perform
as well as in 2005 mainly due to lower contributions from the Zimbabwe
operations.
Sales of PET bottles benefited from the increased demand for carbonated soft-
drinks and juice. A number of long-term contracts were concluded during the
year. There was steady demand for high density plastic bottles for milk and
juice but volumes were affected by the loss of some business to liquid
cartons.
Demand for toothpaste tubes was affected by the importation of filled
product. Plastic tubs showed good growth, and additional capacity was
installed during the year. Plastic crates benefited from increased demand
from the beverage and dairy sectors whilst large plastic drum sales
increased following further conversion from steel by lubricant oil
customers.
The flexibles packaging business improved performance following the major
restructuring in 2005. Demand for long-run flexible packaging continued to
be affected by imports and reduced exports. Sales of bread bags continued to
grow.
Europe
Sales revenue increased following gains in market share, higher polymer
prices and the inclusion for a full twelve months of the two in-plant
operations acquired in 2005. This, together with manufacturing efficiencies
and tight cost-control, resulted in a much-improved operating performance.
Results in 2005 were bolstered by R375 million from the profit on the sale
of the Woburn Sands property.
Group services
Profit from
Revenue operations
2006 2005 2006 2005
Rm Restated Restated
Africa (10) - 31 (196)
Europe 253 172 33 76
Total 243 172 64 (120)
Group services comprise corporate, procurement, treasury and property
management.
Africa
Profit on the sale of properties was partially offset by impairment costs on
the ERP system. 2005 included costs of R225 million for share-based payments
related to the group"s BEE transaction.
Europe
The current year includes profit on the sale of the non-core contract
packing business. 2005 included a curtailment gain on restructuring the
defined benefit pension fund.
ACCOUNTING POLICIES
The condensed financial statements have been prepared in accordance with
International Accounting Standard ("IAS") 34 - Interim Financial Reporting.
The condensed financial statements have been extracted from the consolidated
financial statements which have been prepared in accordance with IFRS. The
principal accounting policies have been applied consistently with the
previous year on the basis set out below.
Until 30 September 2005 the consolidated financial statements were prepared
in accordance with South African Generally Accepted Accounting Practice ("SA
GAAP"). In preparing the consolidated annual financial statements certain
accounting, valuation and consolidation methods applied in the SA GAAP
financial statements have been amended to comply with IFRS. The comparative
figures in respect of 2005 were restated to reflect these adjustments.
Detailed explanations and reconciliations of how the transition to IFRS has
affected the reported financial position and performance of the group were
provided in the restatement of financial information under IFRS published on
the JSE Securities Exchange News Service ("SENS") on 20 February 2006.
An accounting circular was issued in May 2006 (SAICA Circular 9/2006)
providing clarity on the accounting treatment for cash discounts, settlement
discounts, rebates and extended payment terms. The impact on the group"s
income statement has been a reclassification of rebates and discounts from
other operating income to revenue, reducing revenue by R365 million (2005:
R367 million). This has no effect on either profit from operations or
headline earnings.
AUDITED RESULTS
The consolidated financial statements for the year have been audited by
Deloitte & Touche and their accompanying unmodified audit report, as well as
their unmodified audit report on this set of summarised financial
information, are available for inspection at the registered office of the
company. The annual report will be posted to shareholders in December.
DIRECTORATE
Mr TN Jacobs was appointed a director and chief financial officer, effective
1 October 2005.
Mr RJ Khoza was appointed a non-executive director, effective 1 October
2005.
Mr RV Smither was appointed a non-executive director, effective 26 July
2006.
Mr AS Lang retired from the group and resigned as a director, effective 30
September 2006.
PROSPECTS
Over the past few years the group"s focus has been on restructuring,
improving efficiencies and realigning the business portfolio. Whilst this
will remain an integral part of the overall future strategy, much greater
emphasis will be placed on growth.
With Nampak better positioned and the trading environment looking
favourable, particularly in South Africa, the group is on track to deliver a
solid set of results in 2007.
ORDINARY SHARE CASH DISTRIBUTION
Notice is hereby given that a cash distribution No. 2 of 66.1 cents (2005:
56.6 cents) per ordinary share in lieu of a dividend by way of a reduction
of share premium has been declared in respect of the year ended 30 September
2006, payable to shareholders recorded as such in the register at the close
of business on the record date, Friday 12 January 2007, making a total cash
distribution for the year of 96.1 cents (2005: 83.6 cents). The last day to
trade to participate in the cash distribution is Friday 5 January 2007.
Shares will commence trading "ex" distribution from Monday 8 January 2007.
The important dates pertaining to this cash distribution are as follows:
Last day to trade ordinary shares "cum" Friday 5 January 2007
distribution
Ordinary shares trade "ex" distribution Monday 8 January 2007
Record date Friday 12 January 2007
Payment date Monday 15 January 2007
Ordinary share certificates may not be de-materialised or re-materialised
between Monday 8 January 2007 and Friday 12 January 2007, both days
inclusive.
On behalf of the board
T Evans GE Bortolan Sandton
Chairman Chief executive officer 22 November 2006
Non-executive directors:
T Evans* (Chairman), PL Campbell*, DA Hawton*, MM Katz*, RJ Khoza, KM
Mokoape*, ML Ndlovu*, RV Smither*, MH Visser, RA Williams*
*Independent
Executive directors:
GE Bortolan (Chief executive officer), N Cumming, TN Jacobs
Secretary: NP O"Brien
Registered office: Share registrar:
Nampak Centre, 114 Dennis Road Computershare Investor
Atholl Gardens, Sandton 2196 Services 2004 (Pty) Limited
South Africa 70 Marshall Street
(PO Box 784324, Sandton 2146 Johannesburg 2001, South Africa
South Africa) (PO Box 61051, Marshalltown 2107
Telephone: +27 11 719 6300 South Africa)
Telephone: +27 11 370 5000
JSE code: NPK Sponsor:
ISIN: ZAE000071676 UBS South Africa (Pty) Limited
These results and a presentation to analysts and shareholders are available
on the group"s website at www.nampak.com
Date: 22/11/2006 02:00:16 PM Produced by the JSE SENS Department
