KAP Industrial looks to BEE deal for value
IOL - COMPANIES / 21 AUGUST 2019 - 15:30 / SANDILE MCHUNU
DURBAN - KAP Industrial Holdings’ investment of R7.8 billion in the last two financial years has failed to lift earnings in the year to end June after the diversified industrial group reported a 25percent decline in earnings, impacted by costs of a broad-based black economic empowerment (B-BBEE) transaction.
The group said that during the period the company concluded a B-BBEE transaction in its Unitrans logistics business, which resulted in a non-recurring, non-cash cost of R196million being expensed.
Chief executive Gary Chaplin said the BEE deal will create a lot of value for all stakeholders and assist in growing their logistics business. KAP operates three divisions: industrial, chemical and logistics, and each of them have their underlying businesses.
KAP Industrial Holdings’ investment of R7.8 billion in the last two financial years has failed to lift earnings in the year to end June.
Despite the decline in earnings the group is confident about its operations going forward.
The board set a strategy for the 2019 financial year, which was to ensure the completion of the expansion projects and the effective integration of acquisitions into the group, with a focus on market share growth, extraction of value and generation of cash to improve gearing and strengthen its balance sheet. Chaplin said with their strong cash generation and healthy balance sheet, the company is well positioned for growth.
“Various new capacity expansion projects and technology investments have been initiated and will be commissioned during financial year 2020. Management continue to seek out further expansion opportunities in line with the group's strategy. Acquisition opportunities that meet the group's strategic requirements and create shareholder value also remain a stated objective of the company,” Chaplin said.
In the results, KAP’s cash generated by operations increased by 22percent to R4bn, with R2bn of free cash available before paying of dividends.
The group also reported a 12percent increase in revenue from continuing operations to R25.60bn, while operating profit before capital items decreased by 13percent to R2.53bn.
Its headline earnings per share declined by 25percent to 45.9cents a share and earnings per share decreased by 31percent to 41.4c.
KAP declared a dividend of 23c a share.
“The general trading environment has been very challenging and despite the challenges, the company increased revenue from continuing operations by 12percent, indicating market share growth. Margin volatility in the chemical division and subdued economic conditions in our South African logistics and passenger transport divisions have, however, impacted negatively on earnings,” Chaplin said
The group managed to decrease its net debt by R1.24bn during the period to R4.49bn, due to its strong cash generation and the net debt/equity (gearing) ratio reduced from 47 to 35percent.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER