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Empowerment deal pushes KAP’s earnings lower


The industrial group says costs associated with the empowerment deal stripped 7.3c from earnings per share.

KAP Industrial has warned shareholders to expect a decline in full-year earnings, partly due to costs associated with last year's transaction between subsidiary Unitrans Supply Chain Solutions and two empowerment trusts.

In a trading statement, the industrial group said earnings per share (EPS) for the year to end-June would be between 31% and 37% lower than the 57.7c reported a year ago, while headline EPS would be down by 25% to 31% from the 59.8c previously reported. The share-based payment cost recognised for the year was R196 million, equating to 7.3c per share.

Under the deal, it sold stakes in the Unitrans business to the Sakhumzi Foundation Empowerment Trust and the FWG Pieters Trust for a total of R1.2 billion. Unitrans houses KAP's local contractual logistics and supply chain operations, servicing the petroleum, chemical, mining, cement, food and general freight sectors.

Excluding the empowerment deal cost, headline EPS from continuing operations were likely to be between 10% and 16% lower than last year's 61.6c per share.

Operational execution was sound with significant progress made during the year in key areas," KAP said. "Management's focus on cash generation resulted in an increase in cash generated from operations."

The group said cash generation was expected to be between 20% and 24% higher than last year, with free cash flow before dividends of about R2 billion. The settlement of interest-bearing debt improved gearing levels to between 33% and 37%, strengthening its balance sheet.

Its shares rose 3.7% to R5.04. The trading statement was released at the close of trade. Its results are due for release on 20 August.



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