Diversified industrial group KAP Industrial Holdings has raised R2-billion through the issuance of three- to five-year bond tenures to fund its future growth, the firm stated in its six-month interim results for the period ended December 31.
The group on Monday reported that its revenue from continuing operations increased by 29% year-on-year to R11.5-billion, while operating profit from continuing operations increased by 25% to R1.4-billion, cash from operations before working capital improved by 24.6% to R2-billion and net asset value a share increased by 9% to 420c.
The company reported an 11% year-on-year increase in headline earnings a share from continuing operations to 28.3c.
During the period under review, KAP settled R1.75-billion of existing term loan facilities, which meant that it had secured longer dated maturities for its debt. The KAP bond programme had also increased from R5-billion to R10-billion.
Net working capital increased by R1.02-billion to R2.14-billion, largely as a result of the acquisition of Safripol – effective from January 1, 2017 – and elevated inventory levels owing to the delayed start-up of the Hosaf polyethylene terephthalate (PET) expansion project and port delays for related imported products.
Normal seasonal investment in working capital took place owing to peak trading, which will normalise leading up to year-end, KAP CEO Gary Chaplin commented.
Replacement capital expenditure (capex) continues to be managed in relation to the annual depreciation charge and amounted to R486-million for the period, net of proceeds on disposal.
Expansion capex of R483-million resulted from continued investment in the group’s asset base to drive growth and efficiency benefits.
Capex was mainly directed towards completion of the Hosaf PET expansion project and the purchase of logistics and passenger transport vehicles.
To facilitate the various expansion activities of the group, while maintaining a healthy capital structure, R1.5-billion was raised through a fully subscribed rights issue in December 2016, resulting in a 7% increase in the weighted amount of shares in issue when comparing the six months under review and the first half of the 2017 financial year.
Meanwhile, net interest-bearing debt increased by R4.8-billion to R7.5-billion as a result of the group’s acquisitions and capital investment activities that took place during the past 18 months.
“The net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio remains at a healthy two and the Ebitda-to-interest cover ratio is at 5.7, which are both well within target levels,” said Chaplin.
The group has three main divisions, namely its diversified industrial, diversified chemical and diversified logistics groups of businesses, and generates approximately equal revenue and profits from each of the divisions.
Revenue from the diversified industrial segment increased by 4% to R3.4-billion, while the operating profit of the segment increased by 14% to R519-million.
Revenue from the diversified chemical segment increased by 148% to R3.9-billion, while the operating profit of the segment increased by 106% to R385-million.
“The performance of Hosaf was disappointing owing to several weeks’ delay in the commissioning of a major expansion to its PET plant. Revenue, margin and operating profit were negatively affected as a result. The project is nearing completion with production ramp-up well advanced. Demand for PET remains strong, which will support the expansion when operating at full capacity,” said Chaplin.
Revenue from the diversified logistics segment increased by 3% to R4.6-billion, while the operating profit of the segment increased by 4% to R500-million.
The contractual logistics division performed well for the period in the context of subdued market conditions. Recent management appointments and operating structure changes have resulted in a more focused and efficient business.
Margins have stabilised in line with expectation, while certain key long-term contracts were successfully renewed during the period. Activity levels in all major sectors of operation showed improvement.
The passenger transport division performed well for the period, with the exception of the intercity business, which continued to feel the impact of lower passenger numbers and increased competitor activity.
The commuter, personnel and tourism businesses showed good growth for the period, as did the division’s operations in Mozambique.